Good Morning BP!
I'm looking for some advice. I currently own a home and will be moving next year sometime around March (I'm military). Right now I have a unique opportunity to push for a couple of areas and I wanted to know what your opinions on those place are - in regards to beginning REI. I can get San Antonio, CO Springs, or a FL location (Tampa, Ft Walton Beach, Cocoa Beach).
Here's what I am thinking for my strategy. The home I currently own was bought using the VA. I have bonus entititlements available which I was planning on using to purchase a forclosure property to live in. This will be my "practice flip" because I can live in it and work on it at the same time.
My main course of action will be buy and hold (more flips to come later possibly). I think (and your opinions are much appreciated on this) I should focus on cash flow. However I don't know if want to do multi family units or go the forclosure, fix and rent route. This purchase will be via a traditional loan or some other kind of financing. I'm using the remainder of my time at my current location to prep for action in this new area (research, savings, education, etc).
So initial research that I've done on the markets in each of the locations is as follows (please correct/advise me if I am wrong):
CO Springs- I've lived here before. Love the area, however home tend to be built in mass production with very little differentiation and close together. The taxes are low. Lots of military and professionals living in the area. Strategy might be to buy 3bd 2ba SFRs with a rental price range of $1200-$1600/mth (~120,000-160,000 purchase price).
FL- Haven't done much research in this area, only because taxes have kind of deterred me from the area. However, where I would move, would have a high military population, which is great for renting. Focus here would be the E5 - O4 BAH price rang of $1000-1600 / mnth.
San Antonio- This area, from what I've looked at so far, seems very promising. There are lots of forclosures in what I would assume to be nice areas based off of city-data. There is a lot of military and seems to be a booming town. However, I have never been to San Antonio, don't know the area as well as the other two locations, but am willing to take the leap if it looks promising.
So, any advice is appreciated. I would love to hear what you all have to say. Thanks for your advice!
Those are some pretty big open ended questions. I recommend that you develop a strategy and then determine which location will best meet your strategy.
Are you going to keep your present house at Shaw as a rental? If so, I always recommend a property manager.
Your next plan seems to be a live in fix and flip. You will need to have enough cash for the purchase and the rehab.
What is your plan beyond that house?
@Chris L. is spot on; you need to develop a business plan that will serve as an SOP for your new AOR as an investor! While all of the strategies you mentioned will provide you with your desired outcome, you have to understand what your activity produces. Good planning helps you narrow your focus and get to your outcomes with greater success.
I find that military markets remain only as strong as our military, and the number of active duty members at most installations are in decline. This may be a point of consideration in areas where you're depending on the military community for rental income. You may find a resource like http://www.militarybyowner.com to be a good one. Call the REIA leaders for help on the market. They're usually more than happy to help you.
As for entry into the industry, if my first step was to acquire a fix and flip as a primary residence, I'd buy a duplex. Upgrade one side while living in the other to lower your risk exposure. Let's say you left after a year. Banks would consider you a landlord and count that tenant as income. In leaving, you would add another income-producing tenant and move into phase two.
Finally, I think anyone who is new to RE investing needs to understand how to 1) successfully bid and contract for property, 2) create terms for sellers and 3) promise only what you can control. I don't care how ambitious you are; your ability to contract and close deals will separate you from 85% of investors. This only comes by experience, and learning the wholesaling process is the best way to learn what seasoned investors already know... that we make our money when we BUY; we only make our money back when we sell. While you're flipping, learn as much as you can from networking with PEOPLE, walking their properties and understanding how the operate. Don't buy the guru hype unless you can afford it :) Most of us are proud of what we've been able to accomplish and love to share, especially since we learned from others! I would think your best current assets are those in your backyard.
@Andrew Martel Thank you for serving our country!!! All the best as you retire and embark on this new adventure.
My husband is also active duty military . I self manage everything from afar so we have a very specific business pan that I have found works. I have not found any mulitfamily in the areas that make as much as my single family. We buy short sale and foreclosures. As many as we can live in and than make rentals we do. Since this is the cheapest big down payment and interest. Since one can only buy so many personal properties legally we buy the rest as investments.
We have done a true "flip" yet. I have found a house I hope to fix up and rent. I am still evaluating it. We will see what happens. When the market peaks out in 3-7 years I hope to sell it and 1031 the proceeds into another deal.
As for areas, we find areas that work the best number not necessarily the sexiest! We found the nice areas people live and therefore the numbers aren't as great and he demand for rentals is lower. The best places have been the whole in the wall places where people don't sNt to buy therefore there aren't rentals to be be had naturally when people rent instead of sell.
All of out areas have been found through evaluating the local market! We have bought in locations I would never have dream of. Other areas I tried super hard to make work totally couldn't happen!
I appreciate the feedback! @Kevin Cook , I completely agree with you on the business plan side of things and getting some experience under my belt. I'm very excited to dive in and get my feet wet.
If you don't mind, could you dive a little deeper into the explanation of how you might "plan" for something like REI. I can run numbers on homes all day and write our goals and how I might get there, but is there more I should be considering?
I'm currently considering a "practice round" here in my current location. Something low cost, that won't break the bank but I could turn around and profit from (buy, rehab, hold). What do you think?
@Chris L. Thanks for the advice! I am planning on renting this home, rentals here are awesome and aren't on the market very long. I'm hoping ot keep it for another 5-10 years then sell (we'll see). When you're talking strategy, I really like the idea of buy and hold. Buying low and renting out puts cash flow in my pocket and gives me some built in equity. As far as the types of homes that I'm looking to buy, I don't know if i have that solidified yet. SFR's seem like a good idea and to me look like they may be easily managable. Ultimately I would like to be in a situation where I could get out of the military and use investing as my primary mode of income. Could you elaborate some more on strategy or point in the right direction to learn?
Building a cash flow portfolio of homes takes time in my experience. I have not found any magic to investing. I have had success over time with saving money and purchasing cash flowing rental properties. I have found a local lender that will do portfolio loans so that you can purchase multiple rental properties at one time. However, that still requires 25% down.
You need to decide if you are investing for cash flow or appreciation or some combination of the two.
Once you determine your goal, you then need to develop a strategy that will support the attainment of that goal.
One other thought for you: What would happen to your rental if they closed or reduced the USAF presence at Shaw. Although Shaw AFB has weathered the storm so far, Sumter is highly dependent upon the base population.
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