Investor · Broken Arrow, OK · Member since 2016 · 132 posts · 51 votes
Hi BP, how would you invest your 20K? with all the options in RE i want to see what you would do with 20K. my situation: 1. i will be stationed in the US in 10 months and will have 20K to invest. 2. i will need to live in what i invest in, whether that be 1 unit in a duplex, or the SFH i invest in. 3. i am not sure what loans i qualify for. i will find out when it gets closer to the time when i move. 4. i will try to use a VA loan (no down payment, etc.)
so would you split it up and put 10K as a down payment and 10K on rehab on a fix/live? sell when its time to move or rent it out when i move? would you invest the 20K in a duplex? maybe even 15K and have 5K for rehab? any other options you would advise on: please explain the reasoning.
In your position, I would get a VA loan on a 2-4 unit property, and plan to rent it out when you move. Of course, if the market has exploded and you can make a nice profit, then maybe sell, but buy something that makes sense to rent out when you move. Then repeat in a year or two with an FHA, rent that one out, and you'll have 2 nice cash-flowing properties to get your REI career off the ground. That's just what I would do. I'm sure other people have other ideas, too!
In your position, I would get a VA loan on a 2-4 unit property, and plan to rent it out when you move. Of course, if the market has exploded and you can make a nice profit, then maybe sell, but buy something that makes sense to rent out when you move. Then repeat in a year or two with an FHA, rent that one out, and you'll have 2 nice cash-flowing properties to get your REI career off the ground. That's just what I would do. I'm sure other people have other ideas, too!
Investor · Broken Arrow, OK · Member since 2016 · 132 posts · 51 votes
9y
the only issue with that @Kevin Siedlecki is that im not sure if i will qualify for a VA loan. im praying that i do and that will be my goal. but i just started building credit and right now my credit score is at a 683. but it is brand new... hopefully by that time i will be more credible and have a higher score. i will see when the time comes.
Rental Property Investor · Atlanta, GA · Member since 2016 · 85 posts · 49 votes
9y
VA is pretty easy to qualify for. 620 minimum credit score and you're good to go. 683 will get you a great rate with a VA loan. I'd definitely go that route with zero-down and keep that 20k as reserves.
Investor · Broken Arrow, OK · Member since 2016 · 132 posts · 51 votes
9y
John Ford I'm new to the whole credit score thing. So I'm just not sure that only having a credit score for 10 months will make me applicable for a va loan.
Rental Property Investor · San Antonio, TX · Member since 2011 · 266 posts · 158 votes
9y
Jonathan Beemer where will you be stationed? The price point of small multi-families may influence your decision.
I think you'll do well to purchase a 2-4 unit with the VA loan. Take the time to determine your evaluation criteria, so you'll know a good deal when you see it.
Have a plan for your BAH. I recommend that you save it and build up your reserves and/or down payment for the next property.
A quick google search will return a ton of sites related to building your credit score. Take a deliberate approach with your finances and you'll have no trouble getting a VA loan.
Good luck and keep us posted!
-Andrew
Rental Property Investor · Atlanta, GA · Member since 2016 · 85 posts · 49 votes
9y
Your score is fine. The thing you need to worry about now is income. You'll need to show that you have a stable job that makes enough to pay for the loan. For buying your first property, they won't take into account the potential rental income so your income has to be able to cover the entire loan. You said "stationed", are you active duty military? If you're an NCO or officer with decent housing allowance, you should be OK for a reasonably priced place. But with just base pay and no housing allowance looking to go out on your own, it might be tough to qualify. But definitely don't worry about your score, you're good. Not great, but good. And as long as you don't mess it up, it'll just keep getting better. If you're already responsibly using other credit (credit cards or paying off a loan, etc...), it might even bee in the 700s (which would be a great score) in 10 months.
Investor · Broken Arrow, OK · Member since 2016 · 132 posts · 51 votes
9y
I am active duty.
I am not an NCO yet, but should be by the time I get to my next duty station. I will be getting BAH also because I'll be living off post.
I am only using credit deliberately. Before this choice I was using cash for everything. I'm very disciplined with money.
With the BAH that I get I am going to be putting that in reserves for when I get out of the army and move back to Tulsa, OK.
I'm trying to make the biggest bang with all my resources.
Also if I sell all my units because I'd prefer not to manage properties in a different area, I would pay off the rest of the va loan, and essentially if the market is good and the investment is good. Get the money back that the other unit was paying every month.
Jericho, NY · Member since 2016 · 143 posts · 49 votes
9y
Jonathan Beemer you might not have to put anything down at all. hey you should definitely ask a bank or mortgage broker in your area. There are some great benefits to VA loans and you should 100% take full advantage of it for the sacrifice youve made for this country. Don't be afraid to ask before you get stationed here. That way you know how to start preparing.
Virginia Beach, VA · Member since 2016 · 34 posts · 20 votes
9y
Jonathan Beemer with the VA loan the only money you will be required to bring to the table is any associated closing-costs you will be responsible for and possibly an origination fee for the loan. If you have a good realtor you should be able to minimize the closing costs. I've used the VA loan three times and haven't had any issue with getting approved. However, remember that the VA loan is capped so if you do buy a properly and don't sell it when you PCS or ETS you may not be able to use it for your another purchase until you sell or refinance the property you used the VA loan for.
Real Estate Agent · Tulsa, OK · Member since 2016 · 408 posts · 242 votes
9y
If you use the VA loan you will have to get a "turn-key" property. The inspections are quite strict you can get away with cosmetic.
VA loan is a great resource and you deserve the benefits.
Real Estate Broker · Roseburg, OR · Member since 2016 · 29 posts · 13 votes
9y
Hello Jonathan,
Even if you don't qualify for a VA loan, you may qualify for a FHA loan requiring only 0-3% down. I would recommend finding a multi-family property up to 4 units that will finance FHA or VA.
The most difficult thing for an investor using a government insured loan program is that they are very strict on what properties qualify. If you are wanting to purchase a distressed property/moderate rehab, it most likely will not qualify under FHA or VA without some work. The appraisers for these types of loans are just as thorough as a home inspector. In my own experience I had to put my own money into the deal to make repairs to the property before the property even qualified for a loan. This is taking quite a bit of risk, and isn't always the way to go.
If you haven't already obtained a pre-approval I would start there. A good lender will be able to answer your financing questions and figure out the best financing route for your personal situation.
Investor · Broken Arrow, OK · Member since 2016 · 132 posts · 51 votes
9y
@Kenny Rains what is the VA loan capped at? so if you sell the ones you have used a va loan on you can keep using it? just as long as you havent reached the limit? also, what is your experience finding properties that the VA approved? was it very strict and did you have issues with finding a property with the right criteria? such as a "turn-key" property like @Deren Huang said?
Investor · Broken Arrow, OK · Member since 2016 · 132 posts · 51 votes
9y
@John Burtle the limit on the VA loan is 4 units. what route would you advise for 4-5 units? also, is 20K good enough for a down payment for that option? obviously depends on the area... but in your experience have you seen properties like this?
Virginia Beach, VA · Member since 2016 · 34 posts · 20 votes
9y
@Jonathan Beemer I didn't have any issue finding a property however the properties that I purchased with the VA load weren't investment properties. The VA will not let you purchase a fixer-upper because the loan is designed to protect the Service-members. If there are major repairs needed on the property the VA will not approve the purchase. Also the cap is based on the market in which you are purchasing. If you are interested message me and I can tell you what lender I used on my last two purchases.
Real Estate Agent · Tulsa, OK · Member since 2016 · 88 posts · 72 votes
9y
@Jonathan Beemer Remember, over four units will usually fall under commercial instead of residential, and need more of a down payment. And with VA you will need to live in the property...My husband is retired Army and I was talking to a lender friend the other day. I was hoping to use his VA benefits to buy investment property myself, but no dice!
Investor · Madison, CT · Member since 2014 · 710 posts · 458 votes
9y
@John Burtle. Everything changes when you move from 4 units to 5 units. In this case, 2-4 is the route he should go, because he can use his VA loan. Can't do that when you move up to 5.
Investor · Palm Harbor, FL · Member since 2015 · 64 posts · 4 votes
9y
I would suggest looking into a FHA 203k loan as well if you want to buy a distressed multi-unit property. This allows you to take out a loan for the property as well as rehab costs.
You could potentially put only 3.5% down on a 3-4 unit property, have money available to rehab the units and could even likely buy a property with tenants in place so right of the bat they are helping you with your mortgage.
If 1 or 2 units are vacant upon purchase you could be rehabbing those while living there and as the other tenant leases run out then you can then transition to rehabbing their units with some of the $20k you have left over, and by then hopefully already have a new tenant in the rehab units paying at a higher rental rate.
Looks like 640 is the recommended credit score as well and they will consider lower, so you should be fine in that are.
One hurdle may be:
"Cash reserves are not necessarily required, but are encouraged. (3-4 unit properties require reserves)"
Investor · Palm Harbor, FL · Member since 2015 · 64 posts · 4 votes
9y
Also, from my understanding 5+ units is considered commercial residential (regardless of owner-occupied or not) and will likely require a 20% down payment, so I would stay under 5 units.
Investor · Broken Arrow, OK · Member since 2016 · 132 posts · 51 votes
9y
Everyone:
What should I look for in a 2-4 unit if I'm using a va loan?
Obviously va loan requirements are stricter. Is it possible to get a property to rehab a little to make it more desirable to rent and eventually sell?
What rules should I apply?
Investor · Denver, CO · Member since 2016 · 736 posts · 582 votes
9y
Where will you be stationed? For 20k you can buy a house in some markets that may require work. Pay cash, fix it while you live in it, then either sell it or rent it out and move on to the next one (or move into base housing and bank the cash flow)
the only issue with that @Kevin Siedlecki is that im not sure if i will qualify for a VA loan. im praying that i do and that will be my goal. but i just started building credit and right now my credit score is at a 683. but it is brand new... hopefully by that time i will be more credible and have a higher score. i will see when the time comes.