Real estate and other stuff

As a Realtor specializing in rental properties for investors, I spend a lot of time looking at market data on both sales and rentals, both price and days on market, for properties offering comparable features. I compare the sales price to typical rental rates in various neighborhoods, looking for cash flow. Over the last couple of years, I've found that prices for homes in the North East school district, which covers north-central and -east San Antonio, to be a bit lower than they were last year. Several neighborhoods look as if they'd be good prospects for rental investment.

One of the most important factors for successful rental properties is their proximity to major employers. The northeast has access to Washington Mutual headquarters, Fort Sam Houston, Randolph AFB, AT&T headquarters, and downtown businesses and hotels.

The west/northwest has access to USAA, the Medical Center, Lackland AFB, the University of Texas, Valero headquarters, Sea World, Six Flags Fiesta Texas, Clarke checks, and other employers in the Westover Hills area such as Citicorp and World Savings. Up to now, the northwest has been my favorite area for rental properties, especially around the Medical Center/USAA.

Another important factor for both rentals and appreciation is the school district, and more specifically, the high school. Studies have shown that homes in the area of a well-rated high school are more popular, thus appreciating better than comparable homes outside the high school's boundaries. This can be seen in neighborhoods south of Loop 410 in which the dividing line between top-rated Alamo Heights High School and MacArthur High School (well-rated, but not as highly as Alamo Heights) affects families' buying and renting decisions. There is not a gigantic price difference, but it is noticeable.

On the MLS map, the northwest/Northside school district areas include 02,03,04 and 10. Area 05 includes the borderline between Northside and North East, and 06, 14, 15, 16, and 18 are in North East. Alamo Heights is in area 09. If you'd like a copy of the MLS map in GIF format, just let me know.

I am often asked why someone would pay rent instead of applying the same amount to a mortgage on a home instead, so I thought it might be a good time to post some of the reasons. Why do people rent a home instead of buying one? Here are some answers:

They can't.
- They don't have enough cash for a down payment
- Their credit isn't good enough to qualify them for a mortgage

They don't want to.
- They want to be able to pick up and move
- They're scared of the financial responsibility of owning a home
- They're don't want the hassle of maintaining a house and yard

And another reason, particularly in the vibrant San Antonio market, they have sold their house and/or are building a new home.

So what can you do to help these people become good tenants of your rental home? Following are some suggestions:

- Allow the security deposit to be paid in two increments if the tenant otherwise looks good but doesn't have enough money for the first month's rent and security deposit.

- Be willing to rent to tenants with poor credit history-unless they have a history of not paying the rent!

- Write a six-month lease and tell the tenant you want to see if it works out between you both before renewing for another six months or even a year.

- Provide the phone numbers of a yard service and handyman so tenants can take care of things themselves without resorting to complaining or letting things like leaky faucets get worse.

Of course, with the "implosion" of the subprime mortgage market, more people are going to HAVE to rent.

Any other suggestions or remarks?

From Money magazine online, San Antonio ranks 14 out of 15 for job growth prospects, with a 2-year forecast of 4.2%. New jobs are coming up with Affiliated Computer Services, Fort Sam Houston, and Washington Mutual, planning to hire 3,000 new employees for its new operations center. Microsoft is building a $550 million data center, set to open in 2009. 

In addition, there are three research labs here, and on the drawing board are plans to bid on a $450 million federal vaccine lab.

Check out The whole story 

San Antonio is still growing and appreciating and diversifying. Rehabbing and remodeling in gentrifying neighborhoods and in the older suburbs with good schools is becoming an attractive alternative to buying new tract homes outside the outer loop. The commute to downtown or from one side of the city to another is getting too long for comfort. Home buyers and tenants appreciate the older, closer-in, and newly trendy neighborhoods with mature trees and a community feel. With the popularity of Flip This House, lots of locals (with cash) are competing to snap up the cheapest houses as soon as they hit the market. Cheapest properties may not offer the best returns, however.

From the local newspaper is a recent article about some of the revitalization of formerly downtrodden neighborhoods:

San Antonio Express-News

Money magazine's May issue lists San Antonio's projected growth in the next year to be 3.3%, just behind Dallas/Fort Worth (3.6%) and just ahead of Houston (3.2%). San Antonio still has the lowest median home sales price ($146,000) of all three of the largest Texas metros. The only bright spot--for investors--on the mortgage industry's troubles is that fewer home buyers will be able to qualify for a mortgage. With subprime lenders going out of business and other lenders unwilling to pick up the slack, and in fact drastically tightening their lending guidelines, more people will have to rent rather than buy.

In order to appeal to a good-quality tenant, I have found that a nice 3- or 4-bedroom home with a garage, in a good school district, that rents for $1,000 to $1,300 is the sweet spot. Expect to pay $125,000 to $170,000 for a rental property that meets that goal.