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Posted over 9 years ago

Experiences of a "Relatively" New R.E. Investor, Part Three

Welcome back to the third installment cataloging my burgeoning real estate investing “career”.  Actually, up until now, I really viewed these experiences in My First Couple of Blog Posts more like a hobby.  In hindsight, I should have spent much more time learning each individual market BEFORE finding and purchasing each property.  Ah, to live and learn!  C’est le vie!

I arrived at my new duty station in the summer of 2012.  Scott AFB is nestled in a relatively small community about 30 minutes east of St. Louis.  It’s actually a pretty sweet deal: close military family who take pride in executing the mission while looking out for each other; relatively close to several major cities (St Louis, Chicago, Nashville, Memphis), but far enough away to avoid the hustle and bustle; easy access to many outdoor activities; growing tech industry, close to five excellent transportation routes (the Missouri and Mississippi Rivers, and I-70, I-64, I-55); and an exciting baseball team (I’ve drank the Kool-aide and am now a solid Cardinals fan).  Talk about Location!

I started out wanting to live in the city.  As a single dude with no kids, who wouldn’t!?!?  However, the more I looked, the more I realized that most of the properties were 1) old (average age of about 90 years); 2) too expensive for my “needs”; 3) needed a lot of work, or 4) in war zones.  Add that to the fact that the commute would get really old really quick.  Yeah, no thanks.

Therefore, I decided to buy new construction.  New construction?  Why on earth would an investor EVER buy new construction you ask?  I’m sure there are indeed situations were it makes sense.This was not one of them.  Ah, the trials and tribulations of not having BP…

I ended up purchasing a 4 bed, 2.5 bath SFR with one of the bedrooms converted into a loft-like open room concept.  It looked awesome!  Hardwood floors throughout the first floor (good), great kitchen (good), big rooms (good), for $183,000 (bad!).  To top it off, the community had a pool for just $45/month in HOAs.  Rents in the area were going for about $1,500/month for 4 bedrooms and $1,200/month for 3 bedrooms (at this point, I actually had the prudence to look at rents in the area -> good).

Through several conversations with several lenders (good), I found out that I could actually have multiple VAs at one time, up to a limit of about ~$417k.  The loan in Lancaster was for $195k, so I still had ~$200k left. Awesome!  Rents would cover my PITI and I would have to put virtually no money down! Score!  Wait, not so fast….

Those pesky additional expenses that you have to account for: vacancies, maintenance, and capital expenditures.  Dang it!

The verdict is still out on this purchase.  I still have about two more years remaining at this duty location.  I haven’t yet hacked my house by taking on roommates (though I may need to seriously consider this option for the remaining time here).  Hopefully, I can get closer to the average rent for 4 bedrooms at $1500/month.  That will put me at about break even as far as cash flow (actually losing about $75/month).  If I get the 3 bedroom rate of ~1200/month…well…not looking so good.  BP! Where were you?!?

Well now I do.  And now I think I’m quite dangerous.  As you’ve seen, I’ve repeatedly made some pretty bad rookie mistakes.  Nothing to break the bank, but bad nonetheless.  It’s good to say that I’ve been learning along the way, and BP has really brought those mistakes to the forefront of my mind.  Though I’m sure I will continue to make mistakes as I grow, as I’m sure we all do, I truly believe I will get more of the things right going forward.

In the next installment I’ll talk about my latest purchase, which in fact, is a pretty good deal if I must say so!  It’s a 4plex in St. Louis.  I can’t wait to get into that and hopefully hear what some of you have to say.

I would love to hear feedback if you have it.  Go ahead, leave a comment.  I won’t bite.



Comments (4)

  1. @Frankie Woods 

    Luckily, my home was only 133K and the VA loan has a CAP around 400K, so I still have plenty left.  Oh, and the best part of this acquisition was the appreciation since it was purchased in 2012 and is now worth 265K ... rents for $1,450!!

    I have won the lotto with this purchase.  At some point, I will take out a HEL and invest the money in the Midwest for better cash flow. 


    1. @Sandra Roddy love it!  One thing to think about is to refinance to get out of the VA and into a conventional loan to reuse the VA even further.  But, love to hear military folk actually USING this platform.  It's so awesome, and you are doing it right my friend!  I wish you continued success and hope you share your story as you move forward!


  2. Frankie, it was great reading your story.  The VA loan is such an awesome tool!  I have used my VA loan once to purchase a home in Northern Cal and it was a bright move for me.  

    Happy huntings ... you are just getting started!


    1. Thanks for taking the time to read and the kind words @Sandra Roddy !  I'm glad that you were able to use it in NorCal.  I imagine that you were close to the limit?  I'm trying to figure out whether it will be a good idea to refinance one of my properties out of the VA so I can use it again! 

      The hunt has been a blast so far!  The more I look, the more opportunities I see!