Need advise about duplex / fourplex in San Antonio, TX
New to Real Estate · Sammamish, WA · Member since 2020 · 15 posts · 7 votes
Need advise about duplex / fourplex in San Antonio, TX
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Rental Property Investor · Chapel Hill, NC · Member since 2019 · 120 posts · 119 votes
6yI'll be honest - I think you're dead wrong about San Antonio's economic growth being "nowhere near Austin". I'm not quite sure where you came up with that, given that San Antonio is more than 50% larger than Austin and has consistently ranked among the top cities in terms of population growth for the past 10 years. This year alone, San Antonio is the 2nd fastest growing city in the US in terms of population.
Business Facilities puts out an annual report ranking the top metros across the nation in terms of Economic Growth Potential, and San Antonio had been in the top 3 since at least 2016. This year Austin is number 4 on the list, and Houston is number 6. Texas as a whole is growing! I'll grant you that Austin is perhaps more well known and talked about, but keep in mind that San Antonio is much, much bigger than Austin and already has several large employers in place, as well as multiple Universities, professional sports teams, medical centers, scientific research facilities, multiple military bases (Randolph AFB, Lackland AFB, Ft Sam, etc) etc. Austin is growing, no doubt, and is getting some big name employers like Apple and Amazon, but SATX has it's own share of large, national employers.
One other comment I'll make about the housing market in SATX is that home prices seem to be generally lower than Austin, although maybe that is just on the homes I search for. Yes, there are multifamily available in San Antonio, and yes they seem to come up fairly regularly, especially around the military bases.
You've already mentioned one of the biggest negatives, although it applies to Texas as a whole: Property Taxes. They're really high, and in my analysis' usually kill cash flow on a lot of SFH deal. I think both San Antonio and Austin are great places to invest, if the numbers make sense, due to all the reasons above and because there seems to be great appreciation and demand. Good luck!
19 Replies
- Real Estate Broker · Austin, TX · Member since 2016 · 834 posts · 449 votes6y
check out Killeen/Copperas Cove TX for cash flow
- Rental Property Investor · Chapel Hill, NC · Member since 2019 · 120 posts · 119 votes6y
I'll be honest - I think you're dead wrong about San Antonio's economic growth being "nowhere near Austin". I'm not quite sure where you came up with that, given that San Antonio is more than 50% larger than Austin and has consistently ranked among the top cities in terms of population growth for the past 10 years. This year alone, San Antonio is the 2nd fastest growing city in the US in terms of population.
Business Facilities puts out an annual report ranking the top metros across the nation in terms of Economic Growth Potential, and San Antonio had been in the top 3 since at least 2016. This year Austin is number 4 on the list, and Houston is number 6. Texas as a whole is growing! I'll grant you that Austin is perhaps more well known and talked about, but keep in mind that San Antonio is much, much bigger than Austin and already has several large employers in place, as well as multiple Universities, professional sports teams, medical centers, scientific research facilities, multiple military bases (Randolph AFB, Lackland AFB, Ft Sam, etc) etc. Austin is growing, no doubt, and is getting some big name employers like Apple and Amazon, but SATX has it's own share of large, national employers.
One other comment I'll make about the housing market in SATX is that home prices seem to be generally lower than Austin, although maybe that is just on the homes I search for. Yes, there are multifamily available in San Antonio, and yes they seem to come up fairly regularly, especially around the military bases.
You've already mentioned one of the biggest negatives, although it applies to Texas as a whole: Property Taxes. They're really high, and in my analysis' usually kill cash flow on a lot of SFH deal. I think both San Antonio and Austin are great places to invest, if the numbers make sense, due to all the reasons above and because there seems to be great appreciation and demand. Good luck!
- Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes6y
Taxes are high. In my neighborhood they are just over 2.8% per year. This amount will vary by school district and we have about 20 in the area. It will also vary by city which we have over 20 in the county.
If you own a property that is not your homestead, the value can increase wildly year to year. All properties are re-appraised every year which can change your taxes due on a yearly basis. This can drastically reduce cash flow.
- 6yJoseph CacciapagliaBusiness MemberLender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
1. Is it right that it is easy to get Multi Family houses in San Antonio, TX?
The best deals on multifamily properties sell very quickly, and with multiple offers. However, there are always new deals coming up, and there are lots of properties that sit on the MLS that could be purchased right, if you're willing to make offers.
2. Economic growth here is nowhere near Austin. How do other investor feel about this? My main goal being the cash-flow, should i be worried about this? Does apartment get rented quickly for long term (1 year+) quickly?
I think @Steven Griffith addressed this point pretty well, and I agree with his analysis. We've had tremendous rent growth and appreciation over the last few years.
3. Want to hear some more from other investors in this area. Should I be moving forward here? Should I be looking somewhere else? Anything spacial (i.e. Property taxes are pretty high) I should know being in Seattle?
A lot of my multifamily investor clients like the suburbs on the Austin side of San Antonio. These include Converse, Selma, Universal City, and also a small part of SA that's just inside of town on that side. Fourplexes that come up in that area go quick though.
4. I am in Seattle and I will be doing everything (Buying, Inspection, property management) remotely by getting local company's help. Any suggestions?
I don't want to break the forum self promotion rules, so I don't have any suggestions for agents or property management. I'm a big fan of Lance Bryce at Thrive Mortgage for mortgages and Robert Skinner for property inspections.
- Investor · San Antonio, TX · Member since 2019 · 576 posts · 307 votes6y
San Antonio isn't way behind Austin. There are some significant differences, such as days on market being higher, margins being higher, and obviously many different underlying factors as well. But by no means is there slow growth here.
Property taxes are definitely a concern especially if you live in a state with high income tax as well.
- San Antonio, TX · Member since 2016 · 240 posts · 163 votes6y
I agree with every comment so far. I just have a few additional comments to add:
1. Is it right that it is easy to get Multi Family houses in San Antonio, TX?
...I’m not sure what you mean by “easy” but since you want cash flow, I will tell you there is nothing easy about getting that. To me easy is buying something ready to rent and handing it over to property management. And I guess if you put enough down, you will get cash flow. BUT, if you plan to put little down, you will have to be prepared to buy “projects” and rehab in order to force some equity and then refinance. At least that’s the only way I’ve been able to do it. I’d love to know any easier way if anyone wants to chime in.2. Economic growth here is nowhere near Austin. How do other investor feel about this? My main goal being the cash-flow, should i be worried about this? Does apartment get rented quickly for long term (1 year+) quickly?
....Perhaps your concern about economic growth is better termed as economic strength? We are fast growing and have lots of upside as others have written on this thread;however, there is a lot of poverty here and poor paying jobs. COVID shutdowns have really brought that fact to the forefront of concerns for our city as evident in the national news-making massive turnout for food distribution in our city.3. Want to hear some more from other investors in this area. Should I be moving forward here? Should I be looking somewhere else? Anything spacial (i.e. Property taxes are pretty high) I should know being in Seattle?
...I ditto Rick’s cautionary comments on our property taxes. They are high and go up wildly. As an example, a property I bought a year and a half ago for $163k is tax assessed for this year at $220k! Another one I bought 3 years ago for $160k is now assessed at $240k.
4. I am in Seattle and I will be doing everything (Buying, Inspection, property management) remotely by getting local company's help. Any suggestions?
...Long distance investors amaze me. I have no idea how that is done and marvel at those who do it. I know there are lots of investors who are able to do well so I will just leave comments to that end to those who have the experience. I will tell you that my partner and I have encountered many projects that we unfortunately have to finish and re-do because out of state investors were not properly vetting their trades. And here in San Antonio we have an abundance of incompetent trades/contractors who aren’t aware of how to pull permits and adhere to required city building and remodeling codes.
Best of luck! - Investor · San Antonio, TX · Member since 2017 · 344 posts · 268 votes6y
@Paras Newbe I would read @Betty Cruz number 3 and 4 about 10 times before jumping into san antonio.
Are taxes are a nightmare and just pretty unpredictable. Investing locally is hard, and there are horror stories of out of state investors. I recently had someone call me on a project they wanted me to buy that they tried to do from out of state....bought off the MLS for 140k ARV was 300ish, they had been through a year of hard money, two or three contractors, 60-70k paid. Part of the work was permitted, part wasn't. The house was demoed and wide open and they recently got a bid of over 100k to finish it out. These stories aren't uncommon.
I personally love San Antonio and invest here but it would be tough out of state and there are lots of things to consider. - New to Real Estate · Sammamish, WA · Member since 2020 · 15 posts · 7 votes6y
Thank you everyone who responded (@Aaron Bihl, @Betty Cruz, @Stone Saathoff, @Joseph Cacciapaglia, @Steven Griffith, @Danny Webber)
1. I am little surprised about reply from @Betty Cruz. I though investing out of state is very common? isn't it? Is your concern about "how out of state people are buying fixer upper and fixing them up remotely and so on?". I am not into fixer up (defiantly not into that while out of state). My goal is to buy and rent. Then also you would be surprised @Betty Cruz?
2. In Seattle area, prices are just too high. What other investor in BP would suggest in that case?
- Anyone have any suggestion to go somewhere in state that can generate cash-flow? some little town ?
- What other option I have if I am living in high price area.
3. @Betty Cruz, I guess "easy" is a relative term. What i meant to say is, getting cash-flow possibility is more in fourplex then SFH. Would you agree a bit there?
4. About property taxes. As property tax goes up, wouldn't rent goes up too up-to some extent? Lets say Seattle area property tax went from 1 to 3 %. in that case wouldn't all landlord increase the rent to cover high taxes?
- San Antonio, TX · Member since 2016 · 240 posts · 163 votes6y
I don’t want to discourage you but I do want to be frank, as I am sure that’s why you are asking - because you want honest, realistic advice.
1. Yes there are lots of out of state investors. And yes tons of them get into trouble by attempting rehabs. I have many stories like @aaron bihl has mentioned. But if you don’t want to do any rehabs, you would just need to pay more for a property. And if you pay more, you would have to put a lot more down to realize any cash flow, which is what you said you were after.
3. No I don’t believe you will realize more cash flow from a 4 plex vs single family necessarily. As @Joseph Cacciapaglia stated, they are competitive and go fast. If they are good shape, they almost always 1 percent deals or less. And for many, that’s good enough, especially if their play is for long term, appreciation, or tax benefits. But you have specifically mentioned cash flow as your goal.4. I wish that were true. There’s no one answer to all of this. However, we have bought all our houses in appreciating areas and since there isn’t a cap on increasing tax assessments on non-homestead properties, tax hikes can easily outpace rents and what the market will bear. Refer back to my response to question number 2 from your first post that I responded to. Basically, incomes here don’t support raising rents very easily.
One thing I love about real estate is that there is no one answer. There are many ways to make money and many strategies. I’m happy to help you analyze a deal or help however I can.
Best of luck! - New to Real Estate · Sammamish, WA · Member since 2020 · 15 posts · 7 votes6y
Thank you @Betty Cruz. Yes, I am looking for honest opinion.
So it looks like investing in Austin (or may be any other area) with simply "buy and rent" concept, I should be aiming for appreciation (and may be cash-flow after some time).
For cash-flow I need to think more what to do.
- 6yJoseph CacciapagliaBusiness MemberLender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
Originally posted by @Paras Newbe:
Thank you everyone who responded (@Aaron Bihl, @Betty Cruz, @Stone Saathoff, @Joseph Cacciapaglia, @Steven Griffith, @Danny Webber)
1. I am little surprised about reply from @Betty Cruz. I though investing out of state is very common? isn't it? Is your concern about "how out of state people are buying fixer upper and fixing them up remotely and so on?". I am not into fixer up (defiantly not into that while out of state). My goal is to buy and rent. Then also you would be surprised @Betty Cruz?
2. In Seattle area, prices are just too high. What other investor in BP would suggest in that case?
- Anyone have any suggestion to go somewhere in state that can generate cash-flow? some little town ?
- What other option I have if I am living in high price area.
3. @Betty Cruz, I guess "easy" is a relative term. What i meant to say is, getting cash-flow possibility is more in fourplex then SFH. Would you agree a bit there?
4. About property taxes. As property tax goes up, wouldn't rent goes up too up-to some extent? Lets say Seattle area property tax went from 1 to 3 %. in that case wouldn't all landlord increase the rent to cover high taxes?
Investing out of state is very common. The vast majority of my clients are out of state investors. However, they are not usually doing long distance flips or BRRRRs. Most of them are buying tenant occupied multifamily properties that we manage for them. @Betty Cruz is correct that these don't throw off the kind of cash flow that many investors are looking for, but it is typically is positive cash flow. I do know a few investors that have successfully completed long distance BRRRRs, but they are the exception. I spend a lot of my time discouraging new investors from starting off with a long distance rehab project.
If you're buying a relatively new multifamily property in a good area, you're typically getting a 0.85-0.9% rent to price ratio. Most of my investors are are putting down 25%+ and often using a 7 or 10 year ARM. They are interested in having just enough cash flow to sustain their business, while focusing primarily on total returns. This strategy provides an extremely passive income, and great risk adjusted returns.
There are no perfect markets where you're going to buy great cash flowing properties and also have fantastic rent growth and appreciation. I picked San Antonio in large part because I think it has the right balance of both. Sure there are plenty of markets with significantly higher cap rates, but most of them have flat or falling populations, which doesn't bode well long term. There are also markets with greater historic appreciation rates, but most of them provide zero or negative cash flow. You have to decide what's most important to you.
There also isn't a perfect strategy. You either have to take on the risk and work of a renovation, or be willing to purchase your cash flow with a larger down payment. You have to decide whether you're in the business of generating entrepreneurial profits, passive investment returns, or something in between. Many of my clients are high net worth individuals that value their time more than money. They want to get a solid return, but aren't looking for a second job. I have a few on the other end of the spectrum as well, but they tend to be local. If you're doing flips or BRRRRs, you're running a real business, and doing that remotely is just one additional hurdle.
As far as taxes, the issue is increased assessed values, not increases in the tax rate. We have had incredible appreciation rates in some parts of town in the last several year. With increased values come increased taxes. We also have pretty strong rent growth, but that will often lag the appreciation to a certain extent. For example, there is one part of town where two years ago my clients were buying properties at $160K+- and those properties were renting for about $1400. Today in that same neighborhood, the cheapest home for sale is $200K+-, but rents have only gone up to $1500+-. If you're a total returns investor, you're probably pumped to have made $40K in appreciation over two years, plus whatever cash flow and principal pay down you've accrued, but if you're dependent on the monthly cash flow, you might not be as happy.
- Member since 2019 · 140 posts · 24 votes6y
im and out of state investor (actually out of the country...) im not investing in Texas yet, (hopefully ill start late summer) but in a different U.S. market.
I live in Israel, and investing OOS, especially in the U.S. is very popular here, and the main concern we have is that there is not enough deals for everyone.
sure its more complicated that to invest O.O.S. and we all have horror contractors stories, but that doesnt REALLy stopped us, im specifically, in the middle of 42k fix and flip project, and I cant wait to finish it , only to start the new one.
there also alot of us that prefer to buy a rent-ready house and just enjoying the cash flow, but wheres the excitment in there? :)
- New to Real Estate · Sammamish, WA · Member since 2020 · 15 posts · 7 votes6y
Thank you @Joseph Cacciapaglia for the detailed explanation. Couple of interesting take away from your post.
1. I am not looking for BRRRRs but simply Buy --> Rent --> (eventually pay off early and generate cashflow)
1. You mentioned 0.85% to 0.9% rent to price ratio? I could not find any area around Austin to make this happen. According to that number, If i buy a SFH for 330K (2200 SQFT), I need to get $2805 to get 0.85 ratio. Is it possible? What I could see is average rent of 2200 for 2200 SQFT house which accounts for .66% ratio. I will appreciate if you can give me some example where you have seen .85 ratio. Which area has seen this ratio?
2. 7 or 10 ARM will defiantly help with some cash-flow because of low interest rates. I am thinking of 30 year fixed. Would that be a wrong decision. My plan is to hold it. I am looking for eventually pay it off and increase my cash-flow.
3. What are acceptable property management charges in Austin area? couple of search tells me that property management usually takes anywhere between 60 - 90 % of the first month rent and 6 - 10 % every month after that. Is that so? Or this is too much? With this charges for 330K property at 2200 rent, I am actually looking at guaranteed negative cash-flow (considering 5% vacancy, 10% maintenance as well). I will be paying ~2500 / year out of pocket in the hope that market will go up and i will break even one day. Wrong?
- San Antonio, TX · Member since 2016 · 240 posts · 163 votes6y
@Joseph Cacciapaglia Your reply was excellent and everything I was trying to say yet written better. Cheers!
- 6yJoseph CacciapagliaBusiness MemberLender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
Originally posted by @Paras Newbe:
Thank you @Joseph Cacciapaglia for the detailed explanation. Couple of interesting take away from your post.
1. I am not looking for BRRRRs but simply Buy --> Rent --> (eventually pay off early and generate cashflow)
1. You mentioned 0.85% to 0.9% rent to price ratio? I could not find any area around Austin to make this happen. According to that number, If i buy a SFH for 330K (2200 SQFT), I need to get $2805 to get 0.85 ratio. Is it possible? What I could see is average rent of 2200 for 2200 SQFT house which accounts for .66% ratio. I will appreciate if you can give me some example where you have seen .85 ratio. Which area has seen this ratio?
2. 7 or 10 ARM will defiantly help with some cash-flow because of low interest rates. I am thinking of 30 year fixed. Would that be a wrong decision. My plan is to hold it. I am looking for eventually pay it off and increase my cash-flow.
3. What are acceptable property management charges in Austin area? couple of search tells me that property management usually takes anywhere between 60 - 90 % of the first month rent and 6 - 10 % every month after that. Is that so? Or this is too much? With this charges for 330K property at 2200 rent, I am actually looking at guaranteed negative cash-flow (considering 5% vacancy, 10% maintenance as well). I will be paying ~2500 / year out of pocket in the hope that market will go up and i will break even one day. Wrong?
I'm in San Antonio, not Austin, and I'm talking about small multifamily properties. Sorry if that wasn't clear. As an example, there is a duplex that is on the market today. It was built in 2006 and is tenant occupied. Each side rents for $1,275, for a total of $2,550. At the asking price of $285K, it's just over 0.89%. Small multifamily deals with about this ratio are the norm, when looking at tenant occupied properties in good condition in areas with a solid appreciation outlook.
As far as using an ARM, it's a personal choice based on your goals. Most of my clients are focused on their total returns, which leads them to maintain a certain amount of leverage over the long run. This means that every 5+ years they're looking at cash out refinancing or exchanging their properties for something larger. This maximizes their return on equity. If you're more interested in security and paying down your debt, than you are with total returns, then it makes sense to lock in your rates forever and pay it down completely. You usually pay a slightly higher rate for that security.
Property management fees in this area start around 10% and 1 month's rent for new tenants, and go down from there. Many companies will lower their rates as your portfolio grows. This is another area where you have to make a choice. There are more expensive full service options and cheaper limited service companies. There are also companies that quote cheaper rates, but then have a ton of small junk fees to make up for it. It's worthwhile to speak with several managers, to understand the different value proposition that each provides. For out of state investors I would recommend going with more of a full service company. That's why I chose to work where I do.
- Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes6y
@Paras Newbe Initially, you will get more cash flow from San Antonio, in general, as compared to Austin. But history shows that you will get considerably more appreciation in Austin. Why is that? I have my theories, to be sure. Increased pricing is driven by demand outstripping supply.
30 yr amt is good due to historically low interest rates. Do you believe in the Austin market for 30 years? I do but I am on the ground here and have seen it over a very long period of time. Anecdotally speaking, most investors, don't seem to hold their properties for that long. They usually hold it until it becomes a regular pain in the keister then they sell it or it has appreciated so much that they decide that they can 1031 into bigger or more properties. By that I mean that once the components of the property near their life expectancy then it becomes a major expense. Replacements of roof, hvac, plumbing etc can be very expensive propositions. These are all capex. Just food for thought, pal.
Those fees that you mentioned are market based and you are on point with your assessment.
- New to Real Estate · Sammamish, WA · Member since 2020 · 15 posts · 7 votes6y
Appreciate your repose again@Joseph Cacciapaglia@Joseph Cacciapaglia and @Aaron Gordy.
1.Joseph - You mentioned full service vs limited? What is considered full and what is considered limited? Service I am anticipating that I would need are a) property management b) maintenance (I just discovered that this is different from property management). What else would i need?
2. As mentioned above, i think charging few 50 - 90 % of first month rent and 6 - 9 % every month after that is normal. I came to know that there is maintenance charge too (which are not included in property management). People charge like 10% of the maintenance cost as maintenance fees. is this normal? This looks like an open door to me. Any input here?
3. Is maintenance fees is one of the hidden fees I discovered or there are more? can someone please give me example?
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