100k income in 7.5 years

7 Replies

So a buddy of mine introduced me to this site a few months ago and I have been reading and trying to educate myself ever sense. It’s honestly a little overwhelming so I figured I would finally post and seek out some advice.  A little background on myself, I’m currently in the military and will be able to retire in 7.5 years. We currently own two homes and will be closing on our third towards the end of the year when we move. We are planning on moving to Jax Fl when I can retire. 

With regards to what we have, one house is rented, the one we’re in now will be put on the market at the end of the year, and then we will be living in the third for 3 years until we move again. First two homes are located in Goldsboro, NC and the other is in Wichita Falls, TX. 

So here are my current numbers and what I have to work with. I would love to hear some suggested reading or approaches to reach my goal. 

First home: 1016 PI+TI rented out for 1150 with 8% due to management. 0 money down w VA loan.

Second: 1095 PITI, should rent for 14-1500. 0 down w VA loan.

Third: 1100 PITI, I receive 1370 for housing, so I'll be saving the $270 as if it's cashflow.

We have $150k in savings to cover any future investments/repairs/etc. 

So at this point, I’m curious how you guys would proceed? Would you stick w Wichita Falls since I’m still new or start in Jax instead since that’s were we will move to? Obviously I’m going to stick w management companies since I’m not local so that will eat into my cash flow. Finally, I would prefer to be $100k w/o my retirement pay, but if that’s not doable, then I should have an additional $30k coming in which would only require $70k. 

-Derek

Hi Derek,

My wife and I just bought (with cash) two homes in WF, and I had them both rented within a week. Both were in great shape, and we paid in the $80s for them. The rental market is strong there if you have the right product. 3-2s in the 1100-1400sf range are in short supply and rent quickly. We picked one up for $84K that we rented out in a week for $975/mo. The other cost $86K and rents for $950/mo. Bottom line is, I think it's a great market, but you MUST have a good property manager if you are going to live out of WF like we do. (We're about 100 miles away.) There are some reeeaaally sketchy PM companies there. The biggest one in town is also the sleaziest, and the head of it has had her real estate license suspended TWICE for nonpayment of rent proceeds to landlords and other such violations. Our PM is Sandra Wortham and, so far, we think very highly of her. Things we have learned:

1.  Stay in WF proper. Don't go to Burkburnett, Iowa Park, or "satellite" communities. The rent market is simply too thin there.

2.  The sweet spot of the market is the $800-$995/mo. rental.  3-2s rent MUCH faster. If what you have fits that description, hang onto it if you want.

3. WF is a cash flow, not an appreciation, market. Having said that, prices have spiked in the last few months, but it won't last once interest rates go up.

4.  A good PM is everything there. Seriously.  Choose the firm that begins with a "B" and you will be sorry!

What part of town are you in?  I'd be curious to know how you like it there. Also, neither of my renters is stationed at Sheppard.  Can you tell me how the BAH works for renting housing OTHER than with the contracted company (Balfour Beatty, I think)? Good luck.

Great job on buying property while in the military. I always preach that people should be doing that and I only wish I knew then what I know now... man oh man! 

Anyways, there are a couple different ways to look at it and I think it only changes a bit either way. No matter what you do you’ll be a distance investor so it comes down to what market will give you the best return long term. Take a look around, call some realtors, talk to property managers, etc. These people will help you understand what is going on in the areas in which you are interested. That’s a big deal!!! Also, if you don’t have boots on the ground somewhere that can be a big game changer as well. Depends on what you’re comfortable with and how good you’re Pm is. 

All in all you are good no matter what you do as long as you do your research and get the right PM. 

Also, I would read this blog as well. It’s ahows some other great options! https://www.biggerpockets.com/renewsblog/how-to-use-the-va-loan-to-build-capital-for-real-estate-investing/

On a side note, I would also recommend getting a du/tri/quad plex if your family life can handle that. You get up to three other incomes paying your mortgage while you're living for free and when you move out you have four incomes. House hacking is great for military as the VA loan still covers it!

Alfred, it’s super unexpected to meet someone else that has property in the WF area on here. I was not expecting that at all. Unfortunately, we are having a house built up in Burk as trying to get something around the stadium simply proved too expensive. From what I hear, it’s not too bad because it’s closer to the base than the more popular areas in WF, but all I have is others word since I’m not there yet. Regarding BAH, it’s an allowance. So you get paid whatever amount your allotted if your living off base. So for example, I will be getting 1370 and my mortgage will be 1100 so I will be pocketing some money. The rates are public knowledge, so it’s a way to price your home and to keep younger people out if you wish. Also, thanks for the info on your PM. I will give her a call when we get there. 

Adam, thanks for the link. I will take a look at that when I get a chance. Unfortunately for me, I did a fair amount of remodeling and pushed my luck with my better half. She, as of right now, is very adamant about no projects while we live there. We also have a 9mo old, so that doesn’t work so well either. The multi family homes she might be for, but I doubt it as she’s prefers a nice home and yard to come home to. 

I'd sell the first one, you aren't cashflowing enough to cover all expenses.  You could likely even take a small loss, reinvest those funds toward 2 or 3 less expensive properties.  Just make sure you are cashflowing.  A good rule of thumb is 40-50% of rents will be used for expenses.  Then debt service.  

Property mgt: 9%

Vacancy: 8%

Maint: %5

Capex: 3%

Property taxes:??

Insurance: ??

THEN debt service.  What's left will be cashflow

A true cashflowing property means you have all bills accounted for, and do not have to lift a finger, its true mailbox money.  

@Derek Horn , I think you need to ask yourself what your goals are. 7.5 years from now you will be retirement eligible. Are you going to retire then? Is that best case scenario, worst case scenario? Secondly, what are you looking for out of your investments, long term wealth, cash flow, leverage,?? etc... If it is long term wealth, keep them all. You certainly have enough savings. @Jeremy England is correct, you are not cash flowing on property one. However, what he doesn't account for is that you used your VA loan without putting any money down. If you put 20% down, you would be cash flowing, so maybe that trade off is worth it for you. if you are looking for leverage, then I would get your VA loans paid down to 80% over time, and refinance out of the VA loans to free up max borrowing capability and then re-use the VA loan again several times. I don't believe, based on your post, that you are looking for cash flow, but if you want to increase your cash flow capabilities, I would use some of that 150K for a down payment on your next property, or look to buy a rehab with the savings as rehab payment to improve the value of the home on the front. side. With all of these options, the way forward is completely base on your goals and priorities, so I suggest putting pen to paper and mapping out what you want. Good luck!

Keep plugging along @Derek Horn ! The first property is a tight squeeze on cash flow as previously mentioned. I live and work in PM in Goldsboro and Greenville. I would either look at raising the rents a little to provide a little more cushion or possibly selling and reinvesting that money if you have any equity.

I like the path you are on and hope you stay the course!

Just wanted to take the time to say thanks for all the advice received. I know its been a little while since I was on here, but deployment life doesn't lead to being online all the time.