Investor · Salt Lake City, UT · Member since 2012 · 38 posts · 8 votes
BP,
I have been feeling a lot of indecisiveness lately. I almost closed on a deal in St. Louis on a SFR but had it fall through. I'm also in the process of getting a multifamily in Alabama only to be having second thoughts about it. I think I need to go back to the drawing board to determine what path I really want to take in REI but I'm not sure what to do. So here is my question to all the veteran investors. If you had $55K cash, excellent credit, no debt (except my mortgage on the condo I live in), lots of ambition, but didn't have a clue where or how to invest in today's market, what would you do? I have limited mobility due to my 9-5 (military) and am stationed in Hawaii. Any ideas or help or motivation?? I don't want to delay my entry into real estate much longer as I'm convinced I need to buy real estate and wait, not the other way around. Thanks guys!
Investor · Grand Bay, AL · Member since 2012 · 55 posts · 14 votes
13y
Jason,
Your questions is going to be one that gets 10 different responses from 10 different people. It is hard to say what the best thing to do with you resources is unless you know what YOU want to do. Having said that..........
I have rental properties that are doing okay. I purchased them several years ago when you could get financing with little or nothing down and that has, to a certain degree, taught me a very valuable lesson. Do not buy a house for the easy financing. Buy a house for the deal and then find the financing. The main thing that you need to do is make sure that you are getting a property for a good deal. Then worry about the financing (or using cash) and the other things that follow. It does not matter if you plan on flipping, hold and rent, or any other plan that you decide you want to pursue. If you find a great deal then the financing will usually work itself out and the numbers will still work.
If you are planning to flip a house then I would try to find something that is a great deal and then try to find the financing for it. If you are not able to find the financing for it then you can always use your cash and take out a loan for the rehab. Before you use your personal cash, be sure to figure out the true reason that you are not able to secure financing on the deal. Is it because you "think" it is a good deal, because you did not have the motivation to hunt for the right financing, or is it because you have not overcome your "paralysis" and are afraid to move forward and wish to use the financing issue as an excuse?
If it is the motivation then you need to sit down, consider whether this is truly something that you want to be involved in, and then decide to dive in or stay on the side of the pool. Being an investor will take lots of motivation!
If it is the fear of moving forward then find someone, or a great site like BP, to get good and reliable advice and make a more informed decision which should help you with your fears. Be sure to get the property under contract and make sure to get advice during your inspection period, along with the other things that need to be done.
If you are considering a buy and hold/rent position and do not mind being an absentee owner, then you may be in a great position. Being in the Military (I thank you for your service), you have the luxury, or curse depending on your view, of being stationed in different places. You also have access to various loan types that other starting investors do not have.
Have you ever owned your own home? I ask because I know many Military personnel who rent because they move so often. If you do not, then consider buying a home for yourself, at a great price, and live in it until you are transferred to a new location. That will give you time to locate a great management company that can manage your rental when you become absentee, and you can do any work to it while you are living in it.
Assuming you have never owned a home, this will give you a good feel for being a home owner (which may help any fears) and an understanding of all the things that a tenant will be calling about (clogged toilets, leaky faucets, and believe it or not light bulbs that have gone out). All of these things are what a management company are paid for but it is always a good idea to understand as many aspects as you can. What better way than to live the experience?
As an owner occupant, you will have access to better financing (lower rates, lower down payment, etc) than if you were buying an investment property. The only thing you will have to be sure of before you make the purchase is that you don't mind living in the house for a year (or whatever the required period is), the loan type that you get will not hamper you/ or preclude you from getting a loan with the better terms when you are ready to purchase a home for you to stay in more permanently. FHA only allows one loan at a time if I remember correctly. I am not sure about any limitations for VA loans or any other Military loans.
No matter what path you choose, do everything you can to keep from using the money that you have (or as little as possible) to purchase an investment property. The money you worked for is your money and you want to keep it there for a rainy day. Of course, as with everything, there are exceptions to this but it has to be weighed against your comfort level. Just be SURE that you are getting a deal worth using your own money or using a low down payment / low interest mortgage for your purchase. If you are not getting a great deal then you may end putting your own money into it (rentals) if the market turns south again.
I do want to qualify my statements and thoughts by saying, I am not an expert and I do not play one on TV. I have experience with rental properties and have done a few flips in the last few years. I also have experience in losing personal money and that is an experience that you do not want to have to learn the hard way if you can help it. The good news about losing your personal money is that it will be a VERY valuable lesson, although expensive.
Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
13y
I was floating until I really defined what it was I wanted. Once I knew and was able to say exactly what I wanted I found both properties in a matter of weeks.
Investor · Grand Bay, AL · Member since 2012 · 55 posts · 14 votes
13y
Jason,
Your questions is going to be one that gets 10 different responses from 10 different people. It is hard to say what the best thing to do with you resources is unless you know what YOU want to do. Having said that..........
I have rental properties that are doing okay. I purchased them several years ago when you could get financing with little or nothing down and that has, to a certain degree, taught me a very valuable lesson. Do not buy a house for the easy financing. Buy a house for the deal and then find the financing. The main thing that you need to do is make sure that you are getting a property for a good deal. Then worry about the financing (or using cash) and the other things that follow. It does not matter if you plan on flipping, hold and rent, or any other plan that you decide you want to pursue. If you find a great deal then the financing will usually work itself out and the numbers will still work.
If you are planning to flip a house then I would try to find something that is a great deal and then try to find the financing for it. If you are not able to find the financing for it then you can always use your cash and take out a loan for the rehab. Before you use your personal cash, be sure to figure out the true reason that you are not able to secure financing on the deal. Is it because you "think" it is a good deal, because you did not have the motivation to hunt for the right financing, or is it because you have not overcome your "paralysis" and are afraid to move forward and wish to use the financing issue as an excuse?
If it is the motivation then you need to sit down, consider whether this is truly something that you want to be involved in, and then decide to dive in or stay on the side of the pool. Being an investor will take lots of motivation!
If it is the fear of moving forward then find someone, or a great site like BP, to get good and reliable advice and make a more informed decision which should help you with your fears. Be sure to get the property under contract and make sure to get advice during your inspection period, along with the other things that need to be done.
If you are considering a buy and hold/rent position and do not mind being an absentee owner, then you may be in a great position. Being in the Military (I thank you for your service), you have the luxury, or curse depending on your view, of being stationed in different places. You also have access to various loan types that other starting investors do not have.
Have you ever owned your own home? I ask because I know many Military personnel who rent because they move so often. If you do not, then consider buying a home for yourself, at a great price, and live in it until you are transferred to a new location. That will give you time to locate a great management company that can manage your rental when you become absentee, and you can do any work to it while you are living in it.
Assuming you have never owned a home, this will give you a good feel for being a home owner (which may help any fears) and an understanding of all the things that a tenant will be calling about (clogged toilets, leaky faucets, and believe it or not light bulbs that have gone out). All of these things are what a management company are paid for but it is always a good idea to understand as many aspects as you can. What better way than to live the experience?
As an owner occupant, you will have access to better financing (lower rates, lower down payment, etc) than if you were buying an investment property. The only thing you will have to be sure of before you make the purchase is that you don't mind living in the house for a year (or whatever the required period is), the loan type that you get will not hamper you/ or preclude you from getting a loan with the better terms when you are ready to purchase a home for you to stay in more permanently. FHA only allows one loan at a time if I remember correctly. I am not sure about any limitations for VA loans or any other Military loans.
No matter what path you choose, do everything you can to keep from using the money that you have (or as little as possible) to purchase an investment property. The money you worked for is your money and you want to keep it there for a rainy day. Of course, as with everything, there are exceptions to this but it has to be weighed against your comfort level. Just be SURE that you are getting a deal worth using your own money or using a low down payment / low interest mortgage for your purchase. If you are not getting a great deal then you may end putting your own money into it (rentals) if the market turns south again.
I do want to qualify my statements and thoughts by saying, I am not an expert and I do not play one on TV. I have experience with rental properties and have done a few flips in the last few years. I also have experience in losing personal money and that is an experience that you do not want to have to learn the hard way if you can help it. The good news about losing your personal money is that it will be a VERY valuable lesson, although expensive.
Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
13y
Jason Burton If I may suggest the simple reason for your struggles – it is the difference between the chicken and the hog on your breakfast table. You are not committed. You are close, but you are not there. Why not? What makes it OK to walk away? Why do RE in the first place? When it gets tough, why won’t you back off? There is always a reason we succeed. Hope this helps :)
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
If I were you, I'd be looking at deals in the area of my "home of record", wher I was familiar with the area and where they would ship my tail back to getting out (or no further away).
I'd also map out what I wanted in say 20 years and do some backward planning to get there. Then look out five years and start a plan to achieve the mission.
Specialist · Kirkland, WA · Member since 2013 · 1k+ posts · 817 votes
13y
First off, you have a distinct advantage being in the military: VA Loans!
From benefits.va.gov: Purchase Loans help you purchase a home at a competitive interest rate often without requiring a downpayment or private mortgage insurance. Cash Out Refinance loans allow you to take cash out of your home equity to take care of concerns like paying off debt, funding school, or making home improvements.
Every time you move, you should be using a VA loan to purchase another property in an area where it will be easy to rent to other military members! I'd invest near other bases that you have stationed at. You are familiar with the area and where service members want to buy. Moving forward if you can purchase a new home and rent out the one you just left!?! Man, that's sweet.
The biggest thing is to figure out what your long term goal is. And work backwards from there. A lot of people get caught up in this or that new shiny concept. But the people who succeed, plan, strategize, and set goals.
Real Estate Investor · Houston, TX · Member since 2012 · 80 posts · 11 votes
13y
Based on recent events namely the mortgage meltdown and the consultation of guys who have been doing this business a lot longer than me and still doing it.
I would never use my personal credit to do a real estate deal. I recommend 2 ways of buying houses or any investment property.
Investor · Salt Lake City, UT · Member since 2012 · 38 posts · 8 votes
13y
Bill Gulley I can tell you are former military by the way you talk. That's awesome! Yeah the backwards planning is where i need to start. Figure out what my desired end state is and then set the goals from there.
Troy Fisher VA Loans are fabulous and I feel lucky to be able to use them especially now since 100% financing is difficult to find (at least for noobs :))
Thanks for all the great feedback guys and for taking the time to reply. This has helped me get a better picture of what I need to do.
Champlain, NY · Member since 2013 · 18 posts · 0 votes
13y
Originally posted by Troy Fisher:
First off, you have a distinct advantage being in the military: VA Loans!
From benefits.va.gov: Purchase Loans help you purchase a home at a competitive interest rate often without requiring a downpayment or private mortgage insurance. Cash Out Refinance loans allow you to take cash out of your home equity to take care of concerns like paying off debt, funding school, or making home improvements.
Every time you move, you should be using a VA loan to purchase another property in an area where it will be easy to rent to other military members! I'd invest near other bases that you have stationed at. You are familiar with the area and where service members want to buy. Moving forward if you can purchase a new home and rent out the one you just left!?! Man, that's sweet.
The biggest thing is to figure out what your long term goal is. And work backwards from there. A lot of people get caught up in this or that new shiny concept. But the people who succeed, plan, strategize, and set goals.
I've used my VA loan eligibility twice so far, and I had to satisfy my previous loan commitment (payoff) before I could become eligible to get another VA loan. They also require that you use funds to purchase your primary residence. The duplex that I live in may have to be refinanced to a non-VA loan if I decide to move out and rent my unit. If anyone knows otherwise please speak up.
Champlain, NY · Member since 2013 · 18 posts · 0 votes
13y
[b]
Originally posted by Eric Rohver:
Originally posted by Troy Fisher:
First off, you have a distinct advantage being in the military: VA Loans!
From benefits.va.gov: Purchase Loans help you purchase a home at a competitive interest rate often without requiring a downpayment or private mortgage insurance. Cash Out Refinance loans allow you to take cash out of your home equity to take care of concerns like paying off debt, funding school, or making home improvements.
Every time you move, you should be using a VA loan to purchase another property in an area where it will be easy to rent to other military members! I'd invest near other bases that you have stationed at. You are familiar with the area and where service members want to buy. Moving forward if you can purchase a new home and rent out the one you just left!?! Man, that's sweet.
The biggest thing is to figure out what your long term goal is. And work backwards from there. A lot of people get caught up in this or that new shiny concept. But the people who succeed, plan, strategize, and set goals.
I've used my VA loan eligibility twice so far, and I had to satisfy my previous loan commitment (payoff) before I could become eligible to get another VA loan. They also require that you use funds to purchase your primary residence. The duplex that I live in may have to be refinanced to a non-VA loan if I decide to move out and rent my unit. If anyone knows otherwise please speak up.
I just found this on VAnewsblog.com:
"That statement, taken directly from the VA lender's guide, answers one frequently asked question many vets have when facing an overseas tour of duty or re-assignment far from the home they purchased with a VA mortgage.
It IS possible to rent out a home purchased with a VA mortgage–so long as the borrower has refinanced with a VA IRRRL. Like any mortgage loan product, an IRRRL takes time to complete an application and get a response from the lender."
Investor · Milpitas, CA · Member since 2013 · 95 posts · 12 votes
13y
Wayne Brooks That's not entirely true. You are only allowed to used a VA Loan on your primary residence, and you can only use up to a combined total of your VA eligibility, but that doesn't mean you can only have one VA loan. For simplicities sake your VA eligibilty depends on your location but typically it sums to the total of a conforming loan of $417k.
Further, Eric Rohver, You don't have to Re-fi in order to rent the home, as long as your intentions when you purchased/last refinanced the VA loan were to use it as your primary residence, and at the time of closing it was your primary residence, you can keep on using your VA loan just like normal, if you are ordered to move by the military that is literally like a free pass to tell the bank "sorry, I'm moving and now that primary residence is a rental property". Now for examples and situations.
So I have a ~100k home in California that I purchased with a VA loan ~3.5 years ago. I was stationed there for 3 years and refinanced to a lower interest rate (just because) at the 2 year point. 2 years 1 month I got orders to move to Ohio in 6 months. After I left I put my house on the rental market, it is renting out perfectly happy now (finally, don't vacate outside of military move season!)
When I moved to Ohio I purchased a second home, again this was going to be my primary residence while I was in Ohio. I looked into using my remaining VA eligibility on purchasing this home, however I had a problem, when you use a VA loan there are different tiers of the loan you use, these are what the VA guarantees to the loan servicer in case you default. VA only guarantees I think its around $104.25k (check for yourself), which is 1/4 of the total eligibility, but the banks working with VA are comfortable allowing you to use that guarantee to take out a much more expensive loan because the main skin in the game is covered by that guarantee, but the way the VA eligibility is used is on a percentage of the property value. So my first home loan of ~100k was guaranteed at 40% so a large amount of my guarantee was already used. If I wanted to use up additional eligibility in order for it to be worth it to the VA you actually have to meet a MINIMUM purchase price. In Ohio where I moved to this Min was 148k. Now I was a single guy, no kids, and absolutely ZERO need for a 150k+ house in Dayton, Ohio, so what did I do? I liquidated most of my savings and put 20% down and got a conventional loan.
Now I'm being told that I'm going to be moving again in a year, well crap, no time to build enough equity (I think) in the current house to get another 20% for my next place so I will most likely be *cringe* renting there, unless I move to someplace where the market for 3br 2ba houses is >150k, in which case I would consider trying to use my eligibility again.
Things to consider - you NEED to do your research on this, most banks don't know you can have multiple VA loans, and many will tell you you can't get another loan within 1 year of refinancing on one of your other loans. They are WRONG! I broker almost all of my loans out of Kansas (if you want details let me know), because they know what the military stuff is, you can also go with USAA but their home/lending products are typically overpriced (in my opinion and research). When my lender tried to get me preapproved for my conventional loan wells fargo initially said "we won't let him get another personal loan because he just refinanced his VA loan 7 months ago" my lender politely told them to read the soldiers and sailors relief act, and my copy of orders with appropriate date etc, and to process the application, 1 day later I was qualified. Sorry for the long post but there is VERY LITTLE information out there on how to do this and it took me weeks to figure out what was up so I hope to help someone in the process.