Monday, April 7, 2014

Where to Flip in 2014-2015

Emerging San Antonio Real Estate Markets

Whenever a client of mine asks what a house could potentially be worth I tend to respond in a similar way, "whatever a buyer will pay for it...".  Isn't that a simple and true answer?  We real estate agents use comparable sales to make the best educated guess we can about the value of a house but there's certain areas that don't lend themselves well to comping out.  Some areas are just starting to see investors enter into the neighborhood and rehab houses.  Those brave cowboys of real estate usually don't have a very good idea of what a buyer will pay for their finished product but after they do sell begin to establish an MLS track record.  A wise man once told me, "The early bird gets the worm, but the second mouse gets the cheese."

Three years ago if you were willing to buy in Alta Vista or Tobin Hill you were taking a chance.  These days you can't find a property that makes sense in these neighborhoods because regular sellers are comparing their homes to fresh rehabs.  Where you use to be able to buy for $30-40/ft and sell for $100-130/ft you're now facing a tougher market on the buy side.  Unfortunately for you the cat is out of the bag for these neighborhoods.  But I don't bring only bad news, I'm here to inform you of where the next two Boom Flip Neighborhoods are going to be in San Antonio.

Dignowity Hill



As soon as you say "East Central San Antonio" investors run.  Where I bought a 3,000 sqft for $9,000.00 one day and couldn't give it away the city of San Antonio has begun creating some incentives to improve this centrally located area.  Let's be completely real though, the closer you are to Dignowity Park the higher the property value.  12 months ago I wouldn't have touched the area because there was no indication that investors were being successful in selling their completed projects.

But recently there has been a change in the winds.  Where investors are buying as low as the $40/ft price range it seems as though they are selling as high as $130/ft!  While comps are still few and far between this is huge news for investors looking to earn higher than the average return.  While the typical equity spread in San Antonio is somewhere between 25-30%, equity capture here can be as high as 50%.  This is because so few investors are aware of the city incentives to redevelop this area and because of their own personal reluctance to buy on this side of town.  Folks... Not buying on a certain area town because you have a personal issue with it makes you a real estate hobbyist not an investor.  

Government Hill



When I think about this area it kind of blows my mind that it's actually taken up until this point for this area to get hot.  Literally caddy-corner to the downtown central business district you can't really ask for a more central location.  Did I mention it backs up to Fort Sam Houston, one of the largest and most historic army bases in Texas?  The rents here are through the roof and it even has it's own business district off Grayson and New Braunfels.  Now it is important to pay attention to what has been designated as "historic" over here as it does have a profound effect on value.  

Values?  Somewhere between $155-170/ft!  For being regarded as one of the city's roughest areas it's certainly weeding out the riff raff via price point.  With a solid figure being somewhere around $135/ft and purchase prices in the mid 40's/ft it doesn't take a genius to add the figures up to equal higher profit margins.  

I'm not saying you should be the first person to try and flip a house in these areas, I'm saying you're already behind the rest of us.  If you're not looking here you're doing more work for less profit.  Get with a professional and get richer quicker.

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