San Antonio Real Estate Resources

We have analyzed this deal to see how this particular single family home in San Antonio would be as a rental property.

Where is this property?

It is located in San Antonio, TX. The property address is kept private to preserve the deals for our members. To work with our preferred investor friendly real estate agent/broker for this deal, contact us about Deal #965 and they can give you the full details about this property and help you in purchasing it.

How did we find this property?

We found this property from one of our real estate investor friendly agents/brokers or one of the real estate investor wholesalers we know in the San Antonio area.

Learn to find motivated sellers using marketing in Buying House with Bandit Signs. This CD is included as part of the 68 CD Ultimate Real Estate Investor Package that you get when you purchase any house we promote on the website through our recommended real estate agent or broker. To work with our preferred investor friendly real estate agent/broker for this deal, contact us about real estate Deal #965 and they can give you the full details about this property and help you in purchasing it.

The Story

Before we get into our full analysis, here is some of the interesting story for this particular deal: 100% Section 8 Tenant occupying property. In process of completing the next 12 mo. Lease Renewal. Property is on a cul-de-sac and is fully fenced, with 1 car carport, 2 car off street parking, with storage.

Property Details

• Bedrooms: 3
• Baths: 1.00
• Square Footage: 784 (see square footage estimates for info)
• All information is deemed reliable, but is pulled from tax records, real estate agent, zillow or the seller.

Income

• Gross Rent: $600/month (see Rent Estimates for more info)
• 5.00% Vacancy Adjustment: $30/month (see Vacancy Estimates for more info)
• Net Rent: $570/month
• NOTE: These numbers are for traditional rental income and NOT a rent-to-own. Rent-to-own analysis follows below.

Expenses

• Management: Self Managed (we have assumed you will manage the property yourself for this analysis)
• Maintenance: $29/month (see maintenance estimates for info)
• Utilities: $0/month (tenant pays)
• Taxes: $99/month based on $1,182 per year
• Insurance: $37/month (based on an estimate of $446 per year)
• Other Expenses: $0/month

Net Operating Income: $405.83/month

For more info on how I use Net Operating Income in my analysis, read the article, Real Estate Investing for Cash Flow on my blog.

Repairs Needed

The estimated repairs are $1,000 for:

• Misc. Cosmetic Repairs ($1,000)

All repairs are merely speculative estimates based on what the seller (or agent) has told us at this point. Before buying this house you should have it inspected and get quotes for actual repairs found.

Most We Can Pay For This House Based On NOI

• Investor Interest Rate: about 6.740% (see Interest Rate Estimates)
• 30 Year Amortization Fixed Interest Rate
• Principal and Interest Payment = NOI = $405.83
• Max loan for 100% financing with that payment: $62,635 minus closing costs and any repairs

Estimating Value

• Seller claims the value of the property is $67,000.
• Zillow claims the value of the property is $65,500. See Zillow Estimates for more information on why this can be misleadingly high or low.
• Seller is asking $48,500.
• You should analyze the property to determine your offer, but we will use the full asking price for our analysis.

Purchasing The House

Based on getting our full price offer accepted, that would be our purchase price. We will use that in our calculations below.

When buying with traditional financing, I have used just the purchase price (not the estimated repairs in the loan amount) because few loan programs allow you to borrow the purchase price and the repair money. To borrow the purchase price with repair money, you would need to use a hard money loan. So, realize that in my calculations, you still need to pay for repairs.

Nothing Down

• 100% Financing
• 100% financing for investment property is very difficult in our current credit market. There are ways to purchase property with no money down, but you will want to discuss these more creative methods with your lender and the real estate professional we can refer you to when you request information about this deal.
• Hard Money Then Rate and Term Refinance
• We can sometimes buy a house with a hard money loan and then immediately do a rate and term refinance to eliminate the really ugly 20% second mortgage that we describe above on the 100% financing analysis.
• To do this, we need to buy the property well below 80% loan to value.
• It would be close, but it might work for this house. If we really can buy the house for $48,500 (plus $1,000 in estimated repairs) and it does appraise for more than $67,000, then we are at 73.88% of value. I prefer to be well under 75% when trying to do these and the lower the better.

10% Down

• If we purchase it for $48,500, then a 10% down payment would be $4,850.
• Likely, we would then be financing 80% (that's $38,800) on a first mortgage and then 10% (that's $4,850) with a second mortgage with a higher interest rate.
• Principal and interest payments on a $38,800 30 year fixed rate loan at 6.740% are: $251 per month
• Principal and interest payments on a $4,850 30 year fixed rate loan at 9.000% are: $39 per month
• That would leave us with a positive cash flow of $115/month when we subtract it from our Net Operating Income calculation which takes into account a reserve for maintenance and a 5.00% vacancy rate.
• Return on Investment Estimates
• IMPORTANT NOTE: These can change if any assumptions change.
• For putting up $4,850 as a down payment you'd see the following returns from the following benefits:
• Cash Flow
• $115/month times 12 months = $1,385 per year
• $1,385 per year/$4,850 invested = 29% return on investment from estimated Cash Flow
• Depreciation
• $48,500 purchase price with 10% estimated land value leaves $43,650 for the value of the structures that we can depreciate
• $43,650/27.5 years = $1,587 per year
• Assuming a tax rate of about 33%, then a third is the benefit from depreciation
• $529 per year/$4,850 invested = 10.91% return on investment from Depreciation
• Principal Paydown
• $38,800 loan pays down about $349 in the first year
• $4,850 loan pays down about $44 in the first year
• ($349 per year + $44)/$4,850 invested = 8.10% return on investment from Principal Paydown
• Appreciation
• Assuming a 5% appreciation rate. How did we come with that number? See Appreciation Rate Estimates for more info.
• Assuming the property is worth exactly what we paid for it $48,500. If the appraisal comes in lower then we will be forced to go back to the seller since it will affect our ability to get a loan on the property. If it is higher than our numbers will likely be much better.
• $2,425 per year/$4,850 invested = 50.00% return on investment from Appreciation
• Total from Cash Flow, Depreciation, Principal Paydown (first and second mortgages) and Appreciation
• ($1,385 + $529 + $349 + $44 + $2,425)/$4,850 = 97.56% return on investment

20% Down

• If we purchase it for $48,500, then a 20% down payment would be $9,700.
• We would then be financing the balance of $38,800
• Principal and interest payments on a $38,800 30 year fixed rate loan at 6.740% are: $251 per month
• That would leave us with a positive cash flow of $154 when we subtract it from our Net Operating Income calculation which takes into account a reserve for maintenance and a 5.00% vacancy rate.
• Return on Investment Estimates
• IMPORTANT NOTE: These can change if any assumptions change.
• For putting up $9,700 as a down payment you'd see the following returns from the following benefits:
• Cash Flow
• $154/month times 12 months = $1,853 per year
• $1,853 per year/$9,700 invested = 19.11% return on investment from estimated Cash Flow
• Depreciation
• $48,500 purchase price with 10% estimated land value leaves $43,650 for the value of the structures that we can depreciate
• $43,650/27.5 years = $1,587 per year
• Assuming a tax rate of about 33%, then a third is the benefit from depreciation
• $529 per year/$9,700 invested = 5.45% return on investment from Depreciation
• Principal Paydown
• $38,800 loan pays down about $349 in the first year
• $349 per year/$9,700 invested = 3.60% return on investment from Principal Paydown
• Appreciation
• Assuming a 5% appreciation rate. How did we come with that number? See Appreciation Rate Estimates for more info.
• Assuming the property is worth exactly what we paid for it $48,500. If the appraisal comes in lower then we will be forced to go back to the seller since it will affect our ability to get a loan on the property. If it is higher than our numbers would be much better.
• $2,425 per year/$9,700 invested = 25.00% return on investment from Appreciation
• Total from Cash Flow, Depreciation, Principal Paydown and Appreciation
• ($1,853 + $529 + $349 + $2,425)/$9,700 = 53.16% return on investment

Rent-To-Own Analysis

• If you purchase the property and instead of renting it, offer the property for sale on a rent-to-own basis, you can further improve your returns.
• For more information on how I use this strategy, see my article on How To Eliminate Negative Cash Flow.
• Offering flexible financing like a rent-to-own program is an amazing way to eliminate negative cash flow especially when rents are low compared to actual property values like it is in this analysis.
• Here's an overview of how you might structure this property:
• Purchase the property for $48,500 (what the seller is asking) at the investor interest rate of 6.740%
• Sell the property for full market price, $67,000 on a rent-to-own.
• Ask the seller to make payments that would resemble what they would pay on a mortgage for their purchase price with an interest rate that would be accurate for their credit situation and not the lower rent amount of $600.
• For example, if the interest rate for an investor with good credit is 6.740%, then their interest rate might be 7.730%.
• Your payments, if you could finance 100% of $48,500 (the seller's asking price) at 6.740%, would be: $314.25/month
• Their payments, if they could finance 100% of $67,000 (what it's worth) at 7.730%, would be: $479.07/month
• Since they will be buying the house, they would be expected to cover taxes, insurance and maintenance as well, so you have a positive cash flow of:
• (Their Payment To You) - (Your Loan Payment) = Cash Flow
• ($479.07) - ($314.25) = $164.82/month
• By structuring your exit strategy in this way, you can essentially eliminate negative cash flow and find a buyer for your properties that will be closing in the next year, two or three.
• You'd be collecting $164.82 per month in cash flow and $18,500 when you actually sell it by utilizing this strategy.
• For more details on how I personally structure these when I do them, I can send you an audio download once you've gone out and seen this house. Contact me about Deal #965 to get more information and to schedule a showing and I will put you in touch with a local real estate professional who can assist you with your investing purchase.

For more information on this particular deal, please contact us about real estate Deal #965.

Until my next post...

James