Hey guys, I need your input.
I am a 30 yr. old local government employee who wants to be a real estate investor. My strategy is to buy a multi-family home (duplex) live in one end and rent out the other. However, not only do I have no down payment, but between student loans and my car note, it will be six years before I’m able to START saving a down payment.
However, there is hope. If I enlist in either the reserves/guard then after 6 years, I will have VA eligibility and could qualify for a mortgage without a down payment. Right now, the military is looking like my only option if I intend on owning a home or even being a real estate investor by 40 .
- Is my logic sound (using the VA loan to qualify for a no downpayment mortgage on a multifamily duplex)?
- To your knowledge as a property owner/investor/vetera/or person offering advice, is the VA loan worth a 6 year contract (1 weekend a month).
- Are there other alternatives I’m not thinking of? (I know USDA offers now down payment loans but those are on homes in rural areas, so essentially I would scramble for renters, and two I would have a hard time selling the property)?
Thanks for you advice!
Absolutely not. Joining the military is a fine thing (I've done it) but not something to be done lightly... and with FHA or conventional mortgages available the VA loan isn't really that great anyway. Particularly if you have to pay 2% in funding fees.
Now, if you can get a $40,000 bonus for enlisting you may be on to something.
Speaking from the perspective of a current National Guard member. I certainly would think long and hard before joining the military. The guard/reserves offer a lot of benefits (including the VA loan after 6 years or deployment), but they do come at a price. Many people join for many different reasons, but I personally don't believe joining primarily for the VA loan is worth it. If you also have other reasons to join, that is a different matter.
If I were in your shoes, I would delay worrying about buying a rental property and focus first on getting rid of bad debt. I would start with the following:
- Dave Ramsey: https://www.daveramsey.com/baby-steps/?gclid=CjwKC...
- Debt snowball/stacking: https://www.listenmoneymatters.com/get-out-of-debt...
Also, almost just as good and a VA loan is an FHA loan https://www.zillow.com/mortgage-learning/fha-loan/. You can get a loan with as little as 3.5% down and a 580 credit score.
Again to reiterate, I would not recommend joining the military just for the benefit of the VA loan.
Joining the military is a career choice not a short cut to real estate investing. You need to rethink your priorities.
If you want to invest curtail your excessive spending, live frugally and put away every dime you can. Sell th ecar, buy one with cash for a couple of thousand and concentrate on payng off your bad debt. You should be able to cut it down to 3 years if you apply yourself.
If you can accomplish that you may be ready to consider investing.
@Thomas Clark I have to agree with @Seth Borman @Andrew Fredrickson and @Thomas S. As a Navy veteran that served on a Special Operations Gunboat Crew I will be the first to say that I would be less than impressed if one of my shipmates said to me, "I didn't sign up for this? I just wanted to be able to qualify to get a VA Loan?" There were a couple of people that I knew of that complained that they "didn't sign up to go to war, they only wanted to get money for college" They were quickly "encouraged" to get their mind right and those that didn't ended up with a discharge that was not an honorary discharge and they ended up not getting any money for college......let alone qualifying for a VA Loan.
Join the military because you want to serve your nation. If you just do it for investing purposes you’ll just end up hating it.
Speaking as a commander in the US Army Reserves no commander wants a recruit that is only looking out for the benefits. They make terrible Soldiers and always try to get out of deployments.
Agreed with the comments above. I also served a contract and one overseas deployment with the National Guard and Reserves. Those recruiters might make it sound like the greatest thing since sliced bread but you have to realize that most of them have agendas that do not align with yours and are not looking out for your best interest. Not to harp on recruiters, as it is not their job to look out for you, that’s on you.
The sign on bonuses might sound tempting also but they will be paid in installments most of the time and Uncle Sam is going to take a pretty sizable chunk before you even see it.
And as for the one weekend a month thing...drills are much more of a commitment than they’re made out to be trust me. You’ll have an initial 6 months of training after you join in which you are basically an active duty soldier. You’ll have 2 weeks of annual training annually and a lot of those weekend drills will run 3-4 days in length.
From a financial standpoint, you can make a lot more money investing all of this time in other ways. That’s why I would never recommend joining up simply for the monetary benefit though.
Additionally, they always end up deploying or they get the boot with no benefits.
You will hate your life if you're joining for VA benefits lol... don't. You realize you don't have to pay off the student loans or car note to save for a down payment right?
18 year Air National Guard member here. I do recommend you join up, but not for any monetary gain. There is no better feeling in the world than looking back on an awesome career.
Another vet here: Absolutely not. The military consumes you, It's not a job, it's a whole new life.
you won't be spending time getting better at real estate, you'll be jumping out of planes and going to wars.
you'll also be spending lots of time around people who have no interest in financial achievement.
if you're only joining for economic reasons, you're gonna make an embarrassingly large mistake.
Yeah that’s a no go from me too. Cut the spending, sell the car pay down the student loans
Current active duty here, don't for the love of all things join just for real estate.
Its a great career and I love it but the minimal benefits you get wouldn't justify joining. Use some creative financing or partnerships if you don't have the money.
@Thomas Clark Most who join the military do it for a career option and the opportunity to serve. I wouldn't do it just for the VA benefits. Also, you have to think about how deployment would affect you and your family. Good luck with your decision!
I joined on a whim 5 and half years ago and have used a VA loan on one property before I was sent overseas. I can't wait to get out in 6 months, I wouldn't recommend joining just for a loan downpayment VA loan. Its more then a job and benefits, you definitely earn what you get. If you don't like it you'll just be suffering until you get out.
Thanks everyone for the advice!
@Rachel H. , @Steven Dreyer , @Alexander Felice , @Zachary LaJoye ary LaJoye: Thanks you for your services. I hope my questions did not appear as if I was demeaning our service men. Truth be told I always wanted to join the military (Air Force) but around my 30th I realized that widow is closing. Good or bad I don't want that widow to close, and spend my days till my last breathe kicking myself for not joining. At least if I join and its a terrible decision I will know either way.
Also because I want to keep my job, the reserves and guard are my only options, and since I already have a BA and a good job, the only other incentive relevant to me is the VA loan.
VA Follow up questions
- I'm interested in seeing how valuable the VA loan is to real estate investors (if at all)? Is it miles better than an (FHA loan) or just marginally and in what areas? (Bigger pockets podcast has many interviews with investors who got started thanks to the military, but I haven't found a source yet that compares the VA Loan, to an FHA loan or conventional loans.
As another ex-military guy, I mostly agree with Rich as @Alexander Felice :) . My take from a US Navy Gulf War I tour of duty:
1. Hardly anyone around you is going to be worried about real estate and investing. A lot of guys look at the military as a new version of "daddy" so they don't have to think or do for themselves. When I was in, there were a lot of guys that stayed in there mostly because they couldn't make it on the outside. I'm proud of my service, but there are a boatload (no pun intended) of slackers in the military. There is a lot of down time and all of your basic needs are met if you can manage to make it to quarters, keep from getting obese and stay out of legal trouble.
2. Investing while you're in the military is going to be really difficult. Not impossible - there's a couple of podcasts right here on BP of guys that did it - but you move around a lot. I did a 4 year tour and had 4 duty stations in that time. That almost certainly means you're going to invest out of town.
3. Your timing and the military's timing don't always match up. There is a lot of down time in the military, but there's also times when you're working your *** off just about 24/7. No one is going to ask you if you'd like to have some down time to look at real estate or close on a property.
If you think you might want to serve, your first step is to talk to recruiters from all the branches as well as the National Guard. Get a feel for what they have to offer and what they're going to expect from you. My service was worthwhile - I earned an honorable discharge, some medals and letters of commendation, and the ability to access VA health care, which has been most valuable the times in my life that I didn't have any health insurance - but it didn't do anything towards my RE investing career.
The VA loan is an OK product with minimal advantage, nothing special.
it's not miles ahead of an FHA loan, in some ways it's worse. VA loan means you'll be buying a retail home with a strict inspection. Sure it's 0% down, but it also means you're buying retail, not an investment property. as the old saying goes "you make money when you buy", and buying retail is more expensive. You can have the funding fee removed if you're 30% disabled, but that ain't worth it either.
This isn't to say the VA loan isn't useful, but it's a 3.5% advantage over FHA and not really even that. Nothing to get exited about.
@JD Martin slackers in the military?!?! SAY IT AINT SO!
I served, and like everyone else, I vote "No." Join to serve your country, not yourself.
@John Clark I appreciate the feed back but I think joining to "Serve your country" and not yourself is too black and white. Why can't one do both? What is the difference between joining for school money and joining for other incentives.
Where I'm from most vets joined for a spectrum of reasons, and not just to "serve your country"... as they should. It is inequitable that society accepts the U.S. government's use of incentives to recruit and advertise, YET not an individual's right to evaluate those incentive and use them to guide their decision. If one is going to risk life, limb, and family relationships then one should evaluate the whole picture.
"Why can't one do both? What is the difference between joining for school money and joining for other incentives. " -- Thomas Clark
I tell people not to join for school money, too.
If someone is on the fence about serving, bennies can tilt them over the line. You, however, did not phrase your question that way. You asked about joining only for the benefits. You aren't on the fence about serving, even without benefits. Joining should be about serving your country, with benefits being icing on the cake. You're looking at benefits as the end, not service as the end. That, as everyone here has said, is not smart.
Sorry, but I do think of it as black and white.
I don't know why people are saying things like "join to serve your country, not yourself". What? Join to serve your country AND yourself. You deserve to be served if you've served. If there were no benefits to serving, who the hell would do it. This is not North Korea.
Having said that, I firmly believe there are way more efficient means to the end you desire. Hunker down, live responsibly, watch every dollar in and out, and hustle. Two years max before you're ready to go.
@Thomas Clark . Echo the comments of most folks.
As Retired USAF - I encourage you to join up - if you feel the call - the Military can be a truly great career choice - but NOT just for the ability to get a VA Loan.
As you stated you have a BA Degree, so you meet the basic requirement for Officer Training. Spend some time researching the requirements and life demands of a military commitment - talk to some veterans who have been there - done that! And, then make an educated and informed decision.
Benefits of a VA Loan - the only real benefit of a VA loan is the ability to get a ZERO down payment loan. If you have some Cash / can save some cash for down payment - you will be much better served with another type of loan. And even with VA you must have the ability (financial wherewithal) to carry and payback the loan.
Student Loans / Car Note: There are folks with differing opinions on Dave Ramsey's overall view of debt. Very few, however question his approach to getting out of debt. I would challenge you to study his approach and would explicitly recommend you adopt some of Dave Ramsey's techniques and mindset about getting out of debt.
Best of luck - stay on BP as a contributor and gives us an occasional update on your progress.
I grew up in a military household, and as much as I'd have to say on pros/cons I'll say don't do it "solely" for the va benefits. Everyone picks careers for the benefits, but let's look at it this way... You can house hack FHA for 3.5% down. Use that as your benchmark..
So a $200,000 house will need a $7000 min down payment for FHA. If you join the military, you're committing 2-4 years of full-time, beyond 8 hours a day at times service for a $7000 benefit. If you get deployed that can be 12+ hour days, so use that as well.
Use your evenings and get a part time job or second income activity on your free time. You can quit when you want without facing potential jail time, and you'll get your $7000 in a much shorter timeframe without being uprooted and moved everywhere. Drive uber, work in a warehouse, anything else really.
That said...If you have ANY other incentive for joining the military, I do say go for it! It's admirable and I can tell you from growing up with it it will help grow many aspects of your life if you stick it out!
@Thomas Clark when you provide a timeline of six years before you can start saving for a down payment, it's clear that you are thinking that your down payment has to come from you. If you are a smart, energetic guy, you have everything you need to learn about real estate investing - a strategy that makes sense to you based on your skills, network, location, etc. - and partner with someone who has an investing problem, not a cash problem. In other words, find someone that wants to put their money to work. I had -$50k for my first deal and I bought it with seller financing (seller carried back 90% of the purchase price) and I borrowed $450k of private money to close the deal, rehab it and sell it. It was not easy to find, but deals like that are out there if you are resourceful. Tap your network and try to find people with cash, and ask them what kind of returns YOU would need to generate to get them to part with their money. Once you have that, you have your marching orders (deal criteria) to use to find opportunities.