Any advice from military vets
Hey BP,
I've been viewing the site for a few weeks now and thought I would put up my first post.
A quick intro, I'm an accounting student near Pittsburgh, PA and will be finishing up within a year. I am looking to gain as much knowledge as I can from this site so I can take part in real estate investing when I have job and the opportunity to do so.
Prior to school I spent a few years in the USMC, which I think may be the greatest career move I will ever make.
From this service I have questions on VA benefits that I am able to take advantage of.
I have 3 somewhat un-related questions and any advice, comments, or concerns would be appreciated.
1. For the veterans, with investing into a SFR would I be better off with going through USAA or the VA ? Also note, I do have excellent credit so maybe there's another, better option than these two ?
2. I would like to be very open to my future career so moving locations may happen. What are your thoughts on investing into a rental when that moving possiblity is there? Is it easy to just let someone else manage it and leave?
3. As for my long term goals, I am interested in owning a large hotel(s). What's the best way to go at this? Through starting small (SFR, rehabbing...), going into a joint venture on a large property, or just find a franchise that will give me money ?
I hope these aren't dumb questions, I am rather new at this.
Thanks guys,
Paul
"or just find a franchise that will give me money ?"
Not too sure about starting at the top. I guess if you have huge education anything is possible. Short of that I'd say start at the start. Pick some smaller goals and get your feet wet. You never know where things will lead. Good luck.
Paul, welcome to BP. I'm new here also. I'll touch on questions 1 and 2 but question 3 is a little above my level.
I currently have the mortgage on my primary residence through USAA and they have been great. I'm in the process of doing a VA cash out refinance through a local credit union. You can get your VA certificate of eligibility and then shop around for the deal that works for you. I'd be cautious about using the VA loan (or any loan for that matter) that lets you borrow 100% of the purchase price. As you know, market values have been changing quite a bit the last few years. Since you aren't sure you will be staying in your current location it is very possible that if you used 100% financing your house could be worth less than you owe on it next year. What happens if you take a job out of state and have to sell? You would have to come out of pocket for the difference.
Moving to a different city after buying rentals shouldn't be a major issue as long as you have a trusted person in place to manage the properties. I'm currently working in Afghanistan but have few worries because I have a great property manager looking after my units. I'd recommend checking USAA for insurance when you do acquire rentals. They have the best rates I've found. Only issue is they will cover your primary residence and five additional investment properties. After five you will have to shop around.
Sorry I rambled a bit. Hope this helped.
@Jeff - yeah I didn't think that one would be suggested. I'll go the route of starting small, seeing how the process works, learning from mistakes, and moving on from there.
I like how you mention "getting your feet wet" and your profile picture shows you in the middle of the lake. I'm assuming you've done pretty well for yourself !
@ Matt - It's great to hear USAA is working out, I have heard their customer service is fantastic.
Is there a reason you first went through a local credit union vs. VA ?
I do plan on saving for a downpayment, I have seen what 100% financing has done to people during the housing crash. But if 100% is offered, and I'm looking at a long term rental that would be less risky to any current market fluctuations is it worth doing ?
Thanks for the info. on USAA insurance. Good luck out there in Afghanistan!
Paul,
I am using a VA loan but going through the credit union. The VA is "guaranteeing" the loan, not issuing it. You have to certify you intend to live in the property to use the VA loan, so the only way you will be able to use it as a rental is if you buy a multifamily. You could look into a duplex, triplex or quad but you must live in one of them.
ahhh I see. I didn't know it worked that way. Thanks for that info.
As a seller, I've had 4-5 VA buyers in the last 3 months or so. Every single one of them that used USAA for a loan regretted doing so. They had to delay closing multiple times, were difficult to get in touch with, and had extremely poor customer service. This is not one isolated case, or my brothers friends uncles sisters hear say, this is my first hand experience of multiple closings this year. They have been by far the worst lender to deal with.
What really gets me is that all of this nonsense was between contract and closing where they should be working hardest to appeal to the consumer, after all, my buyers were trying to give them business.
Paul,
I'm pretty new myself, but I can speak somewhat intelligently on a few of your questions.
First, very smart on you for using your (I assume) Post 911 GI bill. It's the best deal in town I think you are pursuing a terrific major. I'm a few weeks from finishing my Masters and all six-ish years have been on Uncle Sam's dime.
ok..
1. Like previous posters have said, the VA doesn't actually make the loans, they guarantee them and the big kicker is the 20% down payment is waived (and PMI!!). I have not used the VA loan yet, but I intend to on my next property and roll the equity in my current house into a couple rentals. It's a powerful thing freeing up equity to use for investments. HELOCs are tough to get so the VA could be a good route to get a place to live, build SOME equity, and free up your cash for investment properties. If you plan to move around, though, I'd probably just rent.
2. I have to disagree with Andy in regards to USAA. I've been personally using their services for banking, mortgages, insurance, etc. and I have been nothing but thrilled with their customer service.
3. I wouldn't worry about owning in cities other than where you live, as long as the deal is good and can cash flow INCLUDING property management costs. I actually think it is a good strategy to own properties in places you like to visit or where family lives. Part of your trip can then be tax deductible (consult your tax person)
3. Hotels are probably a good long term goal. They tend to have low failure rates, at least the franchises do (check entrepreneur.com) Problem is you are playing with the big boys and NO franchise "gives you money" quite the opposite. You give them A LOT of money, and their net worth requirements tend to be prohibitive to the small guy (read MILLIONS).
Done rambling. Good luck!
Hey Paul, Semper Fidelis! :D
I have military experience and I'll try to answer your questions:
1. I don't understand the comparison between VA and USAA? USAA is a financial services company and I've been a member for 19 years, they have excellent customer service and their insurance products are superb, however, they won't give you any distinct advantage when it comes to mortgages. In my experience, USAA mortgage products are not very competitive. Now, the VA loan guarantee is the best kept secret available to Veterans and AD servicemembers. My advice is to take full advantage of it, use the 100% leverage to get started into REI. Remember, there's a 2.15% funding fee but that can be rolled into the loan itself.
I would use the VA guarantee to buy a multi-family property and get started, live in one of the units and rent the other/rest. There are some restrictions and requirements, but there's no better way to get started that is available to anyone in a similar position, especially these days.
2. I wouldn't be worried about moving and relocating, I know European people buying and running properties in Florida. In this digital age, the issue of geographical location is becoming less and less important to running a successful investment or rental business.
3. No major advice about Hotels as I have little experience, but you got to start small as others say. Remember, your competition is going to be very fierce and much larger. It's good to have big goals though, good luck with your endeavors. Pay attention to your schooling right now, having an accounting degree and a financial certification is going to open more doors for you than many of us, I would look at getting into a career that can help you with your long term real-estate dreams!
Paul H.
How have your purchases gone? Any reply I would give I am sure is to late for action on your part. I am curious how everything went for you.
Take care,
I am a mortgage lender and have done a ton of VA loans.
Your VA eligibility is a very powerful tool and can and should be put to use buying a home or investment home.
You can do a 100% loan with no money down with owner occupied mortgage rates.
My suggestion might be to purchase a multifamily unit (i would personally look for a 4 plex for division of risk between the 4 units) VA will require the loan is an owner occupied home so you will live in one of the units and rent the others.
One of the best parts about using a VA loan is that you can count the neighboring incomes as "offsetting" funds or in essence as income.
picture it this way: you buy a home with your eligibility and can walk into three units of income from day one with no money out of pocket.
Dont get me started with how cool this scenario gets if you are paying your mortgage with "TAX FREE" BAH. Considering that all mortgage interest up to a million is tax deductable
hope that helps... Just one of these smart purchases early on in a service members 20 year career would be a game changer!
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@James Vermillion may be able to help! I haven't seen him on here lately, so maybe this will summon him!!
With so many excellent answers already, I am going to focus on the third question.
The best way to eventually own a hotel(s) is to show lenders you are able to handle both the real estate investing side and the management side. Hotels are unique in real estate investing because the business side is just as important as the investing side. Your accounting degree will help you greatly, but I suggest finding a partner with experience to ensure your success. Lastly, as mentioned in earlier posts, it is important to build towards your eventual goal. You are doing a fantastic job by starting with SFR and working upwards.
Good luck brother!
