First investment property, need guidance.
We are a married couple looking to buy a house on VA loan at my spouse's next duty station. We are approved for up to 400K on one income and up to 750K on dual income. Normal single family houses are going over 30K of the asking price and it is getting tough to find a desirable location and home under $350. Area we are looking at is Tacoma WA.
Goal:
Find a house/multi-unit near a military base, live in it/manage it (do basic renovations), until the next move upon which we put it up for rent to other military families. Hire a property manager. Rinse and Repeat.
Option A: Buy a single family and do the above (3Br and 2 Bath)
or
Option B: Buy a 4 unit Multiplex, live in one unit and rent out the rest. (2Br and 1 Bath each). Rent out the 4th unit when we leave
Financial Situation:
We can afford $4000K/month towards PITI, while living frugally until we find tenants. This should be enough to cover a 4 unit building initially. We are also looking for close to turn-key property.
Challenges:
Good luck getting a VA appraisal to match the asking price for a 4-plex
What do you guys suggest? Are we trying to bite more than we can chew? Can we make this happen? I would like to charge between 1300-1500/unit each month on a 4-plex no more than $750K
Background:
I own a home in MD and have tenants ready to move in. Cash flow will be 200-300/month.
No other debt.
Thank you.
@Tallal Ibad Lakewood is the perfect spot to pull something like that off. Values are a little bit lower than being in the heart of Tacoma, but rents are still great (being closer to Fort Lewis).
@Tallal Ibad If you're interested in expanding your real estate portfolio, working with a property manager, making sure they are local experts can be one of the most important factors in making sure your rental property is profitable and up to code with local legislation and rental increases.
Having worked with @steverozenberg, Bigger Pockets contributor, professional real estate investor, and Head of Investment Education at Mynd Management, I've learned that not having a local team can be one of the biggest drains on investors return on investment.
There are some great ways to source a local team. I'm happy to tell you more if you're interested.
Hi @Tallal Ibad - Tacoma is certainly a hot market as demand continues to outpace supply. Of the two scenarios you mentioned, I think it really comes down to your goals and your comfort level. A number of my clients have chosen to go the "house hack" route to dramatically their living expenses and supercharge their savings. There are pro's and con's each way but just know that house hacking is very doable!
@Tallal Ibad, the Tacoma, WA market is so hot because the demand is so high. Small multi-family like duplex/Triplex/Fourplex are very competitive in Tacoma and bidding wars typically make prices a lot above asking price. I saw a fourplex go $50K above listing price with 14 offers (some of them were cash buyers). The good thing about Tacoma is that it allows non-resident Accessory Dwell Unit (ADU) without living in it. You can think about this strategy as a starting point. Buy a Tacoma single family that has ADU potential, get the ADU, and rent either part or all the house. Feel free to message me if you needed help with this step and I can help you with ADU or house hack ideas.
@Tallal Ibad
Find a military friendly real estate agent, perhaps they would know another family who is being transferred or needs to sell. Or contact property managers who might know tired landlords or other service members who bought houses while at that base and moved and don’t want to own it any longer.
H @Tallal Ibad - I know nothing of the Tacoma market, i'm over here in Chicago. However, I wanted to comment because to everyone else's point, house-hacking is a very feasible idea in this situation. One thing, I would consider that you may have already is the cashflow that you would receive if you decided to move to another home. It looks like you own a home now and if you move, you would be cashflowing $200-$300 which is great as well.
Hope you are able to find a great investor-friendly agent out there and can find your next house-hack! :)
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Hey @Tallal Ibad - although we're huge fans of SFH's with ADU's and those properties make up over half of our portfolio, I'd strongly consider 3 and 4 unit multifamily homes with your $750,000 pre-approval as well. With a loan that size you have lots of options, especially as you venture outside of Tacoma proper and consider outlying areas.
Larger units (2-3 beds, as opposed to 1 bed) tend to have a little stronger cashflow in our experience, but having a nice unit mix (some 1 bed, some 2, some 3) in a triplex or fourplex can also be convenient for you while living in it and open up options for good tenants to "trade up" within the building rather than move out when their needs change.
The VA loan continues to have a lot of misinformation and misconceptions around it, so educating listing agents and sellers about the real differences between VA and Conventional is always a priority when offering as well.
Best of luck! Although we live in Seattle now, we spent 4 years in Tacoma and still invest down there. Feel free to hit me up anytime for a coffee or phone call if you'd like to chat more.
Sounds like you have some options and good input from the group here. Thankfully we all don't want the same thing, it's already competitive enough as it is. My 2 cents, go for as many doors as you can, so fourplex or a solid triplex as the least. You may still find a Tacoma 4plex for $750k but prices are still going up and testing $800k, depending on the area of Tacoma you prefer. Best wishes on your plans!