Long Distance Investing: San Antonio, TX

29 Replies | San Antonio, Texas

Hey all! My fiance and I are looking to purchase an investment property in San Antonio, TX by the end of the year for no more than $100k. We're currently located in Los Angeles, CA, but through some research and feedback from friends, we have decided that the SA market may have better investment opportunities for us at this time.

I was hoping to hear feedback from people who have recently closed deals in SA who could recommend areas of interest where we may find great leads.

Further, we are looking for ways to better entrench ourselves in the SA market. For those who are currently investing in SA, any suggestions for groups or clubs we may join to meet people in the market; or relevant conferences in the market that are recommended for us to attend?

I know this is a lot of asks, but any feedback will be greatly appreciated!

Hi @Account Closed , my husband are out of state also. I've had my eye on San Antonio for over a year, and we just closed on our first property there a few weeks ago, which is being rehabbed now. I think it's a great place to invest since it is one of America's fastest growing cities, with high rental demand and fewer weather issues than elsewhere in Texas. My strategy is mainly BRRRR with SFRs, so that's what I'll address here, since I'm not sure of your plan:

Your $100k max is achievable as a purchase price, even from the MLS, but will likely take some work, and the rehab could push you over budget. I assume you're planning to BRRRR or at least buy & hold. In the areas where it is possible to buy and rehab a house for under $100k (e.g. the west side and southwest among others), the neighborhoods aren't as desirable and they haven't been seeing as much appreciation, and the rents are lower, which of course affects your cash flow. That said though, I'm sure there are pockets that would work. For example, the area around Lackland AFB is supposed to be solid with renters, and there seem to be livable houses in the $80-90k range - I haven't invested there, but I have been told it's good (although not trendy, so it isn't one of the "hot" neighborhoods - which could be a good or bad thing in my opinion, depending on how close we are to the top of the market).

One thing I would say is to make sure to run your numbers realistically and conservatively, and be patient. If it takes a year to find the right deal, that's okay - it's annoying but much better than getting stuck with a money drain. If you're buying with cash or can put down a fair amount to lower your LTV, cash flow is definitely achievable with single family. However, I haven't found any SFRs that cash flow comfortably in SA with a down payment of less than 40% or so (not to say they're not there, but none are meeting my criteria anyway). There are more multi-family deals that cash flow well on paper, but most of them at that price point are illegal duplex or triplex conversions, which lenders often won't touch - so if you're financing, watch out for that, and if you're buying with cash, keep in mind that it could severely limit your ability to sell later.

In terms of finding leads, there are wholesalers in the market, and some of them are finding some better deals than you can find on the MLS, but a lot of what they're offering is actually pretty comparable to what's available on the MLS. So I highly recommend Redfin - not only to find deals, but also to get to know the neighborhoods.

That said, all of this is based on my personal experience, which is still pretty limited in SA compared to some other people on this forum.

One thread that I have found especially useful in learning the neighborhoods is the following:
https://www.biggerpockets.com/forums/99/topics/513518-san-antonio-tx-how-to-understand-this-market

Also, if you haven't read @Brandon Turner 's "The Book on Rental Property Investing" and @David Greene 's "Long-distance Real Estate Investing," I highly recommend both of those - Brandon's is really great in terms of making sure the readers know how to run their numbers realistically, and David's is great for those of us investing out of state. 

Hopefully this has been helpful. Good luck and happy investing!

Originally posted by @Aidan Mosher :

I have a fantastic referral I can send you for a San Antonio Realtor who specializes in Real Estate Investment. Message me if you'd like his information!

Thanks!

 

@Sheila Ongwae something to consider which I never see mentioned on here with regards to Californians investing in Texas:

1. CA is a low property tax state due to prop 13, but a high income tax state.

2. Texas has no state income but a high property tax.

If you live in CA and buy in Texas you will be paying a lot of taxes. Just keep that in mine

Originally posted by @Sheila Ongwae:
@Caleb Heimsoth

Thanks for the response! Property taxes are definitely a consideration that I am factoring in as I analyze various markets.

also be aware of foundation issues.  Very common in Texas.

 

 

@Heather H. gave some great insights.  It sounds like she has researched our market quite thoroughly; better than some of us that live here!  She is right about some of the Southside areas that can cash flow nicely but don't see the appreciation.  I think deciding which is more important to you is a good thing to do anyway.  But at that price point, you are probably looking for cash-flowing rentals.  We do the same.  We prefer to buy in areas without HOAs and love working class neighborhoods.  What Heather said in regards to illegal multi-units is spot-on as well.

@Account Closed Congrats on your first investment! How's the rehab coming along? The information you provided is fantastic since it's aligned with where I want to start. SFR with the BRRRR strategy within the price range of $80-$90k. I'm curious to know more about your cash flow target since a 40% down payment seems pretty high and "should" get you a decent monthly cash flow, unless I am missing something. Would you mind elaborating a bit more? How much cash flow are your targeting for?

@aiden mosher  I'd also be interested in a referral for an SA Realtor that specialized in Real Estate Investment. I'll send you a direct message. Thanks!


Hi @Eddie Medal , thanks for the shout out.

My strategy is to run the numbers very conservatively and go for at least $200/month cash flow after all expenses. One reason of course is because $200/month is nice to have in your pocket, but the main reason is because it can be so easy to under estimate expenses, I want to make sure there is enough of a buffer that I don't end up with negative yield.

I can't really give numbers on this deal yet though, because it's not yet tenanted or financed. We bought it for cash, and we're planning to re(?)-finance it and pull out some equity as soon as we have a lease in place, as per the BRRRR method.

The rehab went well, although it was a major project and did go significantly over budget. The house is a 3/2 in Highland Park and we paid $110,000 for it, in really dismal shape. The initial rehab estimate was a little over $30,000, and it ended up blowing out to over $50,000. However, we kind of expected that sort of thing to happen, so we budgeted for it (in general when I'm doing initial estimates before deciding whether to offer, I'll double the rehab budget estimate). The overages were mainly from adding big ticket items like foundation, and replacing the kitchen cabinets after finding out that they were completely rotted out, which they couldn't have known until the counter tops were removed. The deal was good enough that we should still get some good equity though. We're about $165,000 into it at this point, and I would estimate it to be worth ~$185,000 but might be more. 

It's under property management and they're advertising it for $1445/month, but that might be a bit overly optimistic. When I did my initial estimates, I assumed $1350/month, but made sure that the deal would still work at $1250/month.

I'll post the final numbers after it's tenanted and financed. 

Also, I work with a great realtor who is very investor friendly. PM me if you want her contact info.

@Heather H. I plugged your number real quick into my spreadsheet and I wonder how you can make this cashflow $200 per month - even without taking capEx and vacancies into account. I'm asking mostly because I always have a really hard time to make the numbers work and I wonder if I have some flaw in my calculations. The only way I can get this to $200 cashflow per month is if I account $0 for capEx and vacancies, no PM and you cannot get a loan for more than $145k. 

Hi @Simon Stahl - you're right. The plan isn't to pull out max equity. The plan is to do the final numbers once the place is tenanted, then pull out however much equity will allow me to keep the monthly cash flow at about $200, which should be $80-$100k. There's two reasons I do it this way - firstly to keep the cash flow in the black, and also because I'm cautious of leverage and I don't think it's a good idea to leverage too much in this high market.

Thanks for explaining @Heather H. Makes sense. Good thing to know that I wasn't completely wrong with my calculation. I already doubted myself.

@Heather H. @Simon Stahl Caution: might lose the forest for the trees - if you have to put down 40%-50% to be in the black, your CoC ROI will be in the 1% range, comparable with leaving the money in the bank and not taking on any of the associated risks. You might get better investing results in other places (stocks, index funds, private lending, etc).

@Account Closed - San Antonio is NOT a city with a high rental demand - it is a city of rentals. It has 5+ military bases around and the density of rentals is 3 times higher than other cities, like Austin MSA. As such, while the property prices are depressed and attractive (but the property tax are still high, eating ~30%+ of your annual rental income), so are the rentals - go checkout how many available rentals are currently active on the market in any area of SAN. Zillow rent estimates are about 10% higher than actuals. 

As I mentioned above, you will not cashflow with all expenses considered (for what and how to calculate the expenses, look here: https://www.biggerpockets.com/forums/12/topics/746081-estimating-capital-expenditures) unless you put a large down payment (30%+) at which point the ROI will be minimal.




When looking at SA be sure to ask yourself if you can afford the property tax and mortgage if the property sits vacant for any extended period.

SA is located in Bexar (bear) County. I previously lived in Live Oak TX which is a suburb of SA located in Bexar County. Less than a quarter of a mile away was a different county and the taxes were a third as much all other things being equal.

-Ben

@Costin I. I agree that my strategy doesn't provide very high cash on cash, but maximizing CoC isn't everyone's goal, and it isn't the whole story when it comes to ROI in BRRR. In addition to cash flow [over cash invested], BRRR investors earn return on their investment through equity growth in the following ways: 1) increasing the value of your property through rehab, 2) mortgage pay down over time by tenants, 3) appreciation over time (hopefully!). When those returns are factored in, the ROI starts to look a lot better than some of the other asset classes you mentioned. If my goal was to maximize CoC, I would be investing in multi family somewhere like Cleveland (which I did consider), but at this point in my investing journey, I'm more interested in long term growth than short term cash flow. Also, I do invest in other asset classes as you suggested, and so far real estate has been more profitable, and much more fun, than any of them.

@Ben Crosby No kidding, taxes are high in SA! They have been the deciding factor against almost all deals I have analyzed. Great idea to check out the surrounding suburbs that aren't in Bexar.

For anyone who wants more info on the BRRR strategy, including detailed instruction on how to calculate ROI so you don't trick yourself into a bad deal, I highly recommend "The Book on Rental Property Investing" by @Brandon Turner

I live in San Antonio and I prefer investing in smaller towns in Texas. Reason being is that San Antonio properties cost almost double the amount and although rents are higher they usually don't make up for it.

That being said, there is a lot o people who invest in SA and make it work. They mostly do BRRRs or wait to find very cheap properties. 

If you want to go for the nicer areas look for properties north, northwest around loop 1604. Those areas have been growing a lot but its very hard to find anything under 100k. Maybe some townhomes or condos.

@Heather H. Are there specific zip codes or neighborhoods that you like?  I looked at the link you Sent from the John Barr and it was from 2 years ago.  Have you seen anything different from the zip codes mentioned for appreciation?  

As far as neighborhoods I see the following as top ten appreciating in last year (not clear to me if this median home price appreciation is forced or due to being more desirable neighborhood:

Region Name Nov-19 6mo 1yr 5yr
Roosevelt Park $165,500 5.68% 17.04% 53.53%
Mission San Jose $125,600 11.15% 15.97% 55.06%
Historic Gardens $198,600 7.29% 15.73% #DIV/0!
Sunny Slope $120,300 2.38% 13.49% 66.16%
Comanche $141,400 4.66% 13.30% 64.61%
Lavaca $354,400 6.36% 13.23% 59.57%
Hidden Cove - Indian Creek-Southwest $111,700 3.33% 11.37% 30.19%
Park Village $132,100 4.26% 11.20% 51.14%
Northwest Los Angeles Heights $135,600 4.79% 10.97% #DIV/0!
Highland Hills $131,100 3.72% 10.91% 50.52%
Woodlawn Hills $168,700 2.43% 10.77% 60.21%


From the data i have seen the following are the most appreciating zip codes in last year:

Zip 6 month 1 year 5 year
78210 2.45% 11.27% 71.87%
78220 3.26% 10.18% 62.09%
78242 2.50% 9.16% N/A
78226 -0.26% 8.97% 50.08%
78227 2.44% 8.69% 50.52%
78228 2.67% 8.15% 54.42%
78221 1.92% 7.92% 48.68%
78224 2.36% 7.86% 45.54%
78264 4.71% 7.77% 44.34%
78218 2.93% 7.09% 49.81%

Hi @Benedict A Hubbert thanks for the shout out and for the neighborhood appreciation info in your post - very informative! I'm actually kind of surprised about a couple of the neighborhoods that did and didn't make the list.

I only have one property in SA so far, and it's in Highland Park (but I've analyzed hundreds of others across the city). I like that area, and it's relatively doable to find properties there in the $110k-$130 price range that will potentially cash flow (depending on a lot of factors of course). I also like the areas around Woodlawn Lake and Los Angeles Heights, but it's harder to find deals around those areas (though not impossible). 

I had been interested in the Pecan Valley/Highland Hills area, but I was off it because I was under the impression it wasn't appreciating much - but I was wrong about that, based on your numbers! So that's my new fav spot!

I had also been interested in the Dignowity area, but it has just gotten too crazy. I've seen a lot of new rehabs sit on the market for months, and I had properties under contract in that neighborhood a couple times with the intention to flip, but after getting contractor bids back, the margins just weren't there - crappy old houses are selling for too much. 

In terms of just cash flow, the neighborhoods far southwest around Lachland AFB seem good. But I'm having a bit of fun speculating, so I prefer areas closer in.

Speaking of speculation, the neighborhoods east of the inner core like Sunny Slopes, and south of downtown like Hot Wells and Mission San Jose are interesting. They're a bit more speculative than I would prefer, but could be the next up and coming neighborhoods (or could fizzle out of course).

Those are just my thoughts - hope they're useful to someone!

Well I said I would post an update after my property was tenanted and financed. We have a tenant now (as of several weeks ago before the covid craziness hit). $1195/month, which is quite a bit below what I expected, even as a low estimate. I'm not sure what we're going to do about pulling equity out now that the economy is in the situation that it's in, so I thought I would post an update anyway.

When the tenant went to move in, the property manager found that the (brand new) A/C condenser had been stolen. We replaced it immediately, and when it was replaced, the city came out to inspect, and the crap hit the fan. There were numerous issues with the rehab work, and we're now about $9,000 further into the property, just fixing everything that was either wrong or missed with the original work. Meanwhile the tenant hasn't had gas because it was switched off after failing inspection, so we're giving her a free month's rent for the inconvenience. 

I am kicking myself for a number of reasons on this deal, but the shoddy workmanship isn't really one of them that I feel would have been preventable if I was there. It looked good, and someone I trust checked it out for me - I'm out of state, but being there would not have changed anything, as I wouldn't have been able to identify duct work that's not to code, etc. by sight. Both the PM and GC seemed very professional and trustworthy, and the whole process seemed to go extremely well. So I am frustrated that the project manager and GC, both of whom I really liked, did such a poor job. It seems like a combination of ignorance and negligence - there were a few issues that I think they genuinely didn't know about, e.g. they installed a furnace closet in an area where it is not allowed (a bedroom). But there were other issues that were just poor workmanship, e.g. the kitchen sink was installed with just glue to hold it in place, and it fell through. I'm also a bit frustrated with the property manager (who is from a professional firm), because they didn't seem to do a pre-rental inspection. It was vacant for months, and some little things that were missed, which would be part of any pre-rental inspection, were only caught after the tenant moved in. They have been working really hard to coordinate all the work that has been going to to fix everything though, so I appreciate that.

I've done light rehab from out of state before (paint, carpet, landscaping, that sort of thing) with no issue, but this was my first major project. I'm just really disappointed because I thought I had a really good team on the ground. I had been planning on doing as many of these BRRRR projects as possible, but now I just don't know.

It'll still cash flow alright without a mortgage, but I haven't even done the numbers yet based on pulling out equity with the new rental figures. It won't be much if it's even an option at all.

@Heather H. I enjoyed reading your very candid post. I love when people share the good, the bad AND the ugly. It helps other people as they take the plunge to get started. You may already know this, but perhaps some don't, that you can know about potential "shoddy" workmanship by making sure the work is permitted. This is easily verifiable on San Antonio's Development Services website - https://www.sanantonio.gov/DSD/Online/Search

Of course, we've seen lots of projects that passed inspections for permits and still were poor quality. Sounds like the furnace install did not go through proper permitting because that never would have passed - same with the ductwork because that has to be correct to pass inspection. But a clumsy sink install wouldn't be caught through city inspections unless it was an issue with the actual plumbing install.

Are you doing anything else in San Antonio? I'd love to connect!