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!
Hampton, VA · Member since 2016 · 31 posts · 8 votes
9y
@Jonathan Beemer The VA loan caps are dependent upon the county in which you are buying your home/living as full time residence (basically, where you are stationed). You can check rates for 2017 here: https://www.fhfa.gov/DataTools/Downloads/Documents/Conforming-Loan-Limits/FullCountyLoanLimitList2017_HERA-BASED_FINAL.PDF
Specialist · Lakewood, CO · Member since 2014 · 1k+ posts · 1k+ votes
9y
@Jonathan Beemer I would be concerned about your ability to get any loan. Lenders know your ETS date and may choose not to lend to someone with an uncertain financial future.
Depending on prices in your first and second destination, you can use your VA loan to buy, then use your remaining entitlement in the new location to buy again. If the prices don't work for 2 purchases, then there are a number of other low down payment loans out there.
If you are looking to buy 2-4 unit properties the lender should be able to use 75% of the expected rent to add to your income.
You VA loan is capped at the same amount as the FHA loans for an area. This is a recent change (2 years) so there isn't any wacky formula anymore. Look at the FHA's map of the US and see what your cap is. That applies to your VA loan. If you move to another location and want to use your "second tier" or "remaining entitlement" you will look at the cap for the area you are moving to, then subtract the amount of your first loan. The remaining amount is what you can buy through VA.
You will not be able to buy 5+ units with any of the loans we are talking about. Those are commercial properties and do not qualify for traditional mortgage financing.
Investor · Broken Arrow, OK · Member since 2016 · 132 posts · 51 votes
9y
Tony Georgiev I have 2 credit cards. Both only a month old. I use one for groceries and the other for gas. Keeps me at 9% on both cards pretty much. And that's all I'm using them for. I pay them off as soon as they pop up on my report. So usually 3 days after.
Ed E. at the moment I don't know. Trying to contact branch to actually be stationed at ft. Carson. But we will see where I end up.
In Colorado, it's going to be tougher to do what I mentioned however, Pueblo isn't too far from Ft. Carson and there are various homes out there in the $30 - $50k range. It might be tough to buy for cash in that area as I suggested - Canon City, Colorado City, and Pueblo West are options to look at though.
Another strategy would be the VA option on a home you could eventually turn into a vacation home near the Arkansas River - lots of fishing and rafting in the summer. I bet you could also rent it as a vacation rental when you move out.
Investor · Fort Smith, AR · Member since 2013 · 150 posts · 32 votes
9y
If youre going to use your VA loan then the $20k is irrelevant. Id househack the VA loan and get that cashflowing. Next, Id partner with someone to rehab and flip using the $20k. The partner can get a loan on a house that needs repair, then use the $20k to fix it up. Flip it in a few months and repeat the process as long as you can get away with it.
Tony Georgiev I have 2 credit cards. Both only a month old. I use one for groceries and the other for gas. Keeps me at 9% on both cards pretty much. And that's all I'm using them for. I pay them off as soon as they pop up on my report. So usually 3 days after.
Spend everything on cards, just make sure you can pay them off when the statement becomes available. Pay off everything every month. A car loan makes good credit very quick as well. Good luck!
Investor · Palm Harbor, FL · Member since 2015 · 64 posts · 4 votes
9y
Curious to know people's counter argument to my recommendation on the FHA 203k loan.
Obviously, a lot of good recommendations on here and a lot come down to your preferences (flipping properties vs. buy,rehab, hold etc).
Seems like the FHA 203k strategy would offer a lot of upside without as much risk. Potential to force appreciation via rehabbing the units, cash flow from the beginning to help you cover mortgage payments. You could also potentially drop PMI via a refinance once done fixing them up in a year or two and increase your cash flow.
Investor · Palm Harbor, FL · Member since 2015 · 64 posts · 4 votes
9y
Well I did a regular FHA loan on my triplex owner-occupied. It was only 3.5% down, and all the units needed rehab, so it let me keep my cash to focus on repairs. Doing this you do get hit with PMI due to the low equity in the property. Rates are low right now so if you end up taking longer then expected to rehab or can't force the equity to 20% post-rehab then refinancing to get rid of the PMI may be pushed back longer and lead to a higher rate when you refinance. You also could be inheriting a property with bad tenants unknowingly since you didn't select them, so need to do your due diligence on obtaining solid proof they were paying rent consistently or you could get stuck covering a higher part of the mortgage. Also, if you have a triplex or quad, that is 3-4 times as many things that can break down of course which can be a nuisance if the property is older or if you arent't too handy fixing little things. I don't know all of the ins and outs of the FHA 203k since I haven't done it but the money they give you for rehab I believe has to be done by a licensed contractor, so if your goal was to do most of the work yourself you may not be able to. Of course you could just do the 203k loan amount for big repairs that are beyond your scope of capabilities.
Like I mentioned before though people have great recommendations on here, but you need to figure out what works for you and what you enjoy. My goal starting off was to slowly build up a stock of buy and hold properties. I have learned with my first one though that dealing with tenants is not my cup of tea, so property managers may be in my not to distant future or I may switch to at least properties dealing with higher quality tenants.
People have suggested flipping on here too, which can be great money, but if you are new to RE in general it might be a steep learning curve and be more risky until you know more. For example, I wouldn't feel comfortable jumping into a flip right now unless my first deal was with someone who has already done a few and has learned the ropes somewhat.