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Starting Out
Account Closed
  • Hereford, TX
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VA Loan Investor Starting Up. You will want to review this excellent plan!

Account Closed
  • Hereford, TX
Posted Aug 29 2014, 00:48

Alright BP, I have been developing a plan for almost a year now for my start in real estate investing. I am very excited to share this plan with all of you, expecially those wanting to use verterans benefits to their advantage, and FHA might have some similiar characteristics to this as well.

A little background story:
I am currently serving in the United States Navy, as a Quartermaster, as well as a Search and Rescue Swimmer. I am exiting my military service in August of 2015, but will be going on my terminal leave much earlier, perhaps June of 2015. I will be starting college in the fall semester of 2015 at the University of Houston using my post 9/11 GI BIll, and intend to purchase an invesment property in Houston. I could have selected many places other than Houston, but my reasoning for selecting Houston is mainly due to the fact that the housing there is relatively cheap, but still good quality, and yet high allowance rates for living from the GI Bill program.

For those of you who do not know exactly how the GI Bill program works, It basically gives you an allowance for books once a year, pays tuition up to a certain amount of cost per credit hour (UH is a Yellow Ribbon school, which more or less means I will pay virtually no tuition through my GI Bill.), and also will give a prospective student a Basic Allowance of Housing (BAH) to be able to assist the student in their college endeavors. The BAH Rate in Houston is currently $1700 a month.

I am going to use my VA loan benefit to purchase an investment property, hopefully with 4 units (loan is for residential, so max is 4 units to qualify) with no money down, and ammortize any of my closing costs into the loan as well. This will allows for a smooth and non-financially burdening with up front cash transition from the military, and allow me to acquire an investment property with little upfront invesment.

I am going to live in one of the units and attend school in Houston. I will be renting the other 3 units out. I have done some work on market analysis of Houston and rental rates, and more importantly the gross rent multiplier of the properties that I will be looking into purchasing. I am aiming for the western side of the city, remaining closer to the south-western side of the city so that I am not too far of drive to the college, which is located downtown. That is where I will begin search first. Living in one of the units and renting the other 3 out, I am projecting to come close to breaking even on cash flow, but erring on the side of having about 200-300 in expenses every month. However, remember my BAH benefit from the Gi Bill? It will allow my to capture the full benefits of 1700 dollars every month for my own living costs.

I am a certified Personal Fitness Trainer through the ISSA, so more than likely I will be working as a Personal Trainer while living in Houston, but I have many different avenues that I can take, and I am also looking into working with a Property Management Company for the experience of property management. I have a certificate in professional property management from Allied business Schools. As a part time personal trainer, I will make making approx. 18-24 Dollars per hour, and earning a monthly stipend of around 1500-1600 per month. I am also intending to file a FAFSA for Pell grant Benefits, which cap out at 2500 dollars per semester, and whatever scholarships that I can get. These are great, because since my tuition is payed in full by the GI Bill, that money will go to the school, and then get kicked back to me in cash. So My first semester will start off with a 3500 kicker (2500 for Pell and 1000 for "book" expenses from the VA) and my second semester will start off with a 2500 dollar kicker. My project income from all of these sources of income will be approximately 3500-4000 per month. Not bad for a college goer who isnt paying rent.

I more specifically intend to purchase using a VA EEM mortgage, which allows a payment of 6000 to be taken out of the loan for energy efficient modifcations to the home. I am going to get a LEED certified energy audit on the units to determine what is the best avenue to approach in spending that 6000 dollars the most efficiently for modifying the property for the most value improvement reduction of operating costs in the building itself. I may invest some of my personal capital alongside with that 6000 original, however, it is not necessarily my goal to expend all of my working capital (will be between 8-10,000) on the property right away. These improvements will make the home operate for much cheaper, as well as increase my equity right off of the git-go, which i will need soon down the road.

I am going to more than likely going to manage the property myself when I first get it, using Buildium as my management software, on a desktop computer with an external harddrive backup, as well as an online backup. I have almost a complete set of legally reviewed documents ready to go with the exception of my lease.

After a year or two of owning the property, I would like to refinance with a VA IRRRL. This refinancing will allow me to reduce my interest rate, relinquish my occupancy requirement for having to live in the building, freeing up another unit for rentals, and recognize my equity build-up in conjunction with a new appraisal. After that I intend to use a home equity line of credit/ loan to power play for a down payment on another residential building, with as many units as I may be able to afford (I am thinking around 4-5, but may look into condos/ other investments as well.)

After about 4-5 years of living and investing in Houston, I am wishing to build up enough capital in equity/cash to be able to afford financing on a commercial apartment complex, or possibly condominiums.

I have started searching for my business team in the Houston area, and I would love to get some refferals, as well as some good neighborhood suggestions for looking for investment properties.I haven't found too much yet, but I will get there. I am very excited to start this adventure. I intend on visiting their around this December/early January time frame, and would love to meet up with some investors in the area, or some possible business teammates, to include contractors, realtors, attorneys, accountants, LEED certified Auditors, Lawnkeepers, and the like to start solidifying a relationship between us!

I ask the biggerpockets community to review my plan for errors or suggestions to help guide me. Your feeback is invaluable to me and is appreciated beyond all measure.

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