Critique my 5 year plan using VA loans, house hack and wholesales

Starting Out
5yFollow

Critique my 5 year plan using VA loans, house hack and wholesales

Brandon Thomas
New to Real Estate · San Diego · Member since 2021 · 5 posts · 4 votes

Hello BP community! I am looking for stable financial freedom in the next 5-6 years investing in multi-family properties. I am currently active duty military and I own a single family rental property in Oceanside that has almost $200k in equity and has very negligible cashflow (for now).

My plan: Upon my return from deployment at the end of the year, I intend on using the VA loan to buy a multi-family home in the San Diego or Oceanside area (depending on my next set of orders) and use it to house hack. This property would most likely be in the $1-$1.5 mil price range. By house hacking, I would save on average about $1500/month, yet I will most likely have minor negative cashflow in the first 2 years, but the properties should have high appreciation.

In 2022, I intend on purchasing two multi-family rental properties out of state for the sole purpose of cashflow. They would be in the $200k price range. In order to fund these properties, I intend on focusing my craft on wholesales and building/saving the money for the down payments on the houses. My intention is to find houses that can yield $400-$500 in cashflow each. 

In 2023, I will be ending my services in the military and I intend on using the VA loan one last time (after refinancing the first MFH) to buy another MFH for appreciation and to use as another house hack. In order to ensure stability during eventual crashes in the market, I plan on paying off my 5 properties. I would use my W2, money saved through house hacking, and income generated from wholesales to pay off the principle of the cheapest property in my portfolio. I would then use the increased cashflow from that property to pay off the second cheapest property. I would continue doing this until all properties are paid off. At the end, I should be generating nearly $20k in cashflow and be worth $3mil.

What do you think of this plan? Are there any gaps to my train of thought? Is there a better/faster method in order to accomplish my intent of stable financial freedom? 

As a new investor, I am a sponge to advice and critiques. Thank you for taking the time to read this and I look forward to the responses!

4Reply
29 views

Most Popular Reply

Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
5y

@Brandon Thomas you may have heard the saying, "no battle plan survives contact with the enemy". This plan has several ways things can go wrong, so be resilient and able to adapt to a new plan. 

1Reply
See this reply in the discussion

11 Replies

Jump to latestLatest
  • Eric James
    Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    5y

    A lot of moving parts, and if one link fails the whole plan may come apart. Biggest risk: your wholesaling plans will fail. Wholesaling is one if the hardest things to do in real estate. Not many new people are successful at it. 

    Next, there's a good chance the cash flow properties you buy won't make $400-500 each. It's possible, but for a beginner to land two of these early in is like rolling double 7s.

    Other possible problem: you won't have enough income to qualify for loans. Good luck though.

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y

    @Brandon Thomas you may have heard the saying, "no battle plan survives contact with the enemy". This plan has several ways things can go wrong, so be resilient and able to adapt to a new plan. 

    1Reply
  • Brandon Thomas
    OP
    New to Real Estate · San Diego · Member since 2021 · 5 posts · 4 votes
    5y

    Thank you so much for your responses! So in regards to wholesaling being a critical piece to this puzzle, would taking out a HELOC on the property that has $200k in equity be a wise decision to fund the down payments of these properties? What about finding a hard money lender?

    And I completely agree that no plan survives first contact. Are there any recommendations to provide some contingencies that I could look into? Any recommended strategies?

    0Reply
  • James De Leon
    Real Estate Agent · San Diego, CA · Member since 2020 · 69 posts · 32 votes
    5y

    You have a good plan Brandon! Buying a MFH here in SD with a VA loan is such a great way to add to your real estate portfolio. Though you may not have the positive cash flow right away, the appreciation from rents and the house itself will be well worth it in the end. If you buy right then you can definitely cash flow right from the jump. I bought my 4plex with a VA loan here and I cash flow right from the start. Just have to be mindful of all the possibilities, opportunities and routes that your plan can go.

    I do agree with Eric in that wholesaling will be the biggest "what if" in the plan. It's not impossible to do, but definitely difficult. If your plan is reliant on the chance that you'll succeed in wholesaling then you need to really go after it or your plan will not come to fruition as fast as you want it to go. With that being in mind, you have to think about how else you can fund your ventures and if you could qualify for your loans since your DTI will skyrocket when getting that first MFH.

    The question of is there a better/faster method to accomplish financial freedom is dependent on your goals. What is your financial freedom number? How many properties and cash flow will it be to reach said number? etc.  You have to be able to look into your plan and once you start to execute, adapt and overcome based on what happens. Don't hesitate to reach out if you have any questions. Good luck Brandon!

    0Reply
  • Brandon Thomas
    OP
    New to Real Estate · San Diego · Member since 2021 · 5 posts · 4 votes
    5y

    @James De Leon Thanks for the words of wisdom! I definitely plan on using these next few months analyzing deals and getting comfortable with them so that I can make a quick and educated offer once I get back to the states whenever a good deal comes my way. It seems like my DTI ratio will be a hurdle that I also need to look further into, especially when investing in San Diego.

    As for wholesaling, it won't be my "end-all-be-all." This is one of the only strategies that comes to mind when attempting to find new money for a down payment. Using a HELOC on my current property is also an option.

    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    5y

    @Brandon Thomas do you need / want to be in San Diego?  If you want to live there - that's great.  I just wanted to ask if any other markets are possibly in consideration for you.  As @James De Leon pointed out, debt is a major factor in your plan.

    0Reply
  • Mike RobbPro Member
    Realtor · Ventura County, CA · Member since 2016 · 58 posts · 28 votes
    5y

    @Brandon Thomas

    - I've been active duty for over 21 years and have live in multiple areas of San Diego over my time at various SD based duty stations. I am currently in the Ventura County, CA area and invest in multifamily, wholesale, as well as serve clients as a Realtor for in/outbound military :)

    If your up for it - Let's hop on a call to discuss the specifics of your plan and see if some of the finer details need to be addressed.

    I am in a Mastermind group of fellow Wholesalers ( many in the San Diego market )

    What market do you plan on wholesaling in?

    I'd be glad to get you connected with some other folks in San Diego.

    ~Cheers

    [email protected]
    1Reply
  • Brandon Thomas
    OP
    New to Real Estate · San Diego · Member since 2021 · 5 posts · 4 votes
    5y

    @Nicholas L. I will most likely receive orders to San Diego or Oceanside, so I will need to be there for at least a couple years. California is also my home state so I can also see myself settling down here post military. I really want to invest here as well since the appreciation of homes in the SoCal area seem to be a great way to accumulate wealth.

    Several people in this thread (which I appreciate everyone's response) keep mentioning the DTI ratio that I'll run into. Since I intend on renting out these properties, won't tenants also be included as a source of income which should subsequently decrease my DTI?

    @Mike Robb Sure! I will message you to set up a good time.

    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    5y

    @Brandon Thomas yes, rental income will increase the income side of your DTI equation, which will help as you note. But, if you run the numbers, you'll see that, say, a $1M loan in San Diego will probably result in a much higher DTI than, say, a $250K loan somewhere else, even if the San Diego rents are higher.

    But again, if living in San Diego is essential (as you said) or even just important to you - that's great and you should go for it.

    And, you probably know this already but you can talk to lenders now, for free, and go through all of this.  You can ask how much you can borrow now; how much you could borrow in a hypothetical situation where you have another cash-flowing rental; etc.

    0Reply
  • Paul MoorePro Member
    Commercial Real Estate Fund Manager · Lynchburg, VA · Member since 2015 · 1k+ posts · 1k+ votes
    5y

    Hi @Brandon Thomas. Thanks for serving our nation!  I’ll throw in another option: Passively investing with great syndicators.  This works well if you don’t want to be actively involved in managing your properties.  You share the profits with a pro who can often more than compensate for that split by lower risk and higher profits.  This frees you up to focus on anything you want to do and still gives you the tax deductions of real estate investing. Good luck!  

    Podcast Guest on Show #533
    0Reply
  • Brandon Thomas
    OP
    New to Real Estate · San Diego · Member since 2021 · 5 posts · 4 votes
    5y

    @Nicholas L. Thanks for the advice! The DTI piece will probably be a huge concern, especially if buying a multi family in San Diego a second time is the plan. I'll most likely have to adjust and find another plan for 2023. That's a great idea talking to lenders to find out what I could theoretically qualify for. I did know this, but completely forgot about it as a means to run numbers through, so I appreciate the reminder!

    @Paul Moore Thank you for providing me with another option! I like this idea as it is a passive investment because it aligns well with my goals. Currently, the only syndication I've been involved with is through Fundrise. Typically about a 7% return from what I've seen from the last year and a half. 

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free