Military family buying first investment property

20 Replies

We're PCSing to New Hampshire within the next couple of months and we want to buy an owner-occupied multifamily. My husband is in the service so we plan to use a VA loan in his name. I'm currently unemployed so I can't get the loan in my name. We're unsure about how things will work with rental income. Someone told me that there would be legal issues with him being AGR getting a BAH while also receiving rental income given his rank (O4). I want to buy more multifamily properties in the future, so I'm wondering if for legal/tax purposes it would make sense to start an LLC. Thanks in advance for your help!

Worry about getting the property first and LLC later. Whoever told you it was illegal to get rental income and BAH doesn't know what they are talking about. I get BAH and have been buying rentals for a while now.

Welcome to BP and NH!  Is your husband Army or Air Guard?  I’m currently in the Army Guard as a Blackhawk pilot, only part time though because I’m a realtor and investor full-time. NH is a great place to invest and there’s lot of good opportunities for owner occupied places too. 

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@Joia, there is no issue with your husband collecting rental income from his home.

Also, I wouldn't worry about an LLC for that home while it is your primary residence. You'll be able to do HELOCs and stuff if it is in your primary residence (albeit not immediately if you finance 100% of the purchase). You can move it into an LLC later.

The house hack is a great strategy, especially when you are able to leverage the VA loan to make it happen!

@Frank Geiger Thanks for the quick response! I figured I was getting ahead of myself with the LLC bit but just wanted to make sure.

@Matthew Dennehy Thanks! He's Army, formerly SOF but he will be an ROTC instructor now. He's letting me take the lead with house hunting but once he reaches the 20 year mark I'm hoping he'll get more into real estate with me :-) I'm glad there's a lot of owner occupied opportunities in NH- we're leaving ft bragg where the opportunities are almost nonexistent. I'm from RI originally so it will be nice to be back in New England too. 

@David Pere Thanks for the insight! I figured the LLC idea was a bit premature but just wanted to see if anyone had experiences with it for future reference. I've listened to your podcast and you provide a lot of good info for military families, so thank you for that too!

Congrats on your orders to NH and good luck on your first investment property!
I grew up in New England (Massachusetts) and used to do a lot hockey tournaments and hiking in NH. It's beautiful! Nothing beats fall when the leaves are changing! 

Welcome.  I’m from southern NH.  I think there are decent options for house hacking in the area.  

As far as an LLC is considered I would offer the following. An LLC is a legal structure and not a tax structure. The term LLC isn't in the tax code and YOU chose how the LLC is taxed. (Sole proprietorship, Partnership, S-Corp etc). What you choose is going to depend on your situation and the help of an experienced CPA can help determine the best choice.

An LLC as I said is a legal entity and can provide some legal protection depending on how it's set up and how you run it.

If you looking to do a VA loan then you're looking at residential financing and many lenders won't let you take title as an LLC with residental financings. You would have to take title in your/husbands name and use a quit clam deed to transfer ownership to the LLC after closing. In doing so a lender theoretically could take action on the"due on sale clause" although I hear this rarely if ever happens.

If this is your first property and you don't Have a ton of other assets to worry about protecting then I wouldn't worry about the LLC yet. I would find the property and put the title in my and my spouses name and make sure you have a good insurance policy on the property and a good umbrella for yourself.

@Joia B.

I'm an active duty military member and I love it when other military families get into the real estate game. I have been collecting BAH and rental income for the past 5 years and there nothing wrong/ illegal with that. Obviously, there are rules on loans that you have to reside in the property for a specific time, but if you are doing a house hack/multi-family, you won't have to worry about that. My biggest advice is to do your homework like you are now... and to be careful who you listen too... whoever gave you that info clearly is not a real estate investor... 

Ps. Follow @David Pere  he is a nerd! lol but he know his stuff and helps out our military community.

Welcome @Joia B. I am on the same boat. Exploring using VA loan to purchase a multi in MA under my husband's name. Currently taking the lead and also hoping he will get more involved later. It's going to be exciting!

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Thanks @Elena C. ! I'm finding that the VA loan is very strict about their criteria for purchasing... every house I've looked at so far isn't up to par even if it's just chipped paint. Getting a little discouraged but it's only the beginning and it's not something that should be rushed. I hope it's going well for you!

One of the things I wished that I had done earlier was go multi-family vs single family rentals. Obviously there are opportunities to make the 1% rule with a SFR but I never accomplished it with rentals I owned from 2005-2015. Shifting to a multi's was the first time I started making true ROI. Don't give up on your search!!

@Rich Hill thanks for your input! since the we're struggling to find a multi family right now we're also looking into a single family that has an in-law apartment so we can make a little income while we live there for a couple years, and since it's in a college town we could potentially rent by the room and then buy a multi family when we know the market better and have some experience as landlords

Fantastic idea!  I recently did the same in West Virginia, focusing on Zillow searches of single family homes using the key words of "in-law" and "kitchenette" and "apartment".  I laugh when Realtors tell me that listing as multi-family reduces the chance of selling but it is often the truth, particularly in more rural markets.

Great idea. Just to pile on with affirmation, there is nothing wrong with getting BAH and rental income. We've done it for years. Enjoy NH and I hope your husband has fun as a PMS. I'm thinking of applying for next years board!

@Rich Hill we were actually located in WV up until a few months ago, and before I found out we were moving I was doing the same thing! I guess a lot of realtors don't have the investor mindset

@Carlos Terrones thanks I'll try that!

@John Burns thank you, I figured if I heard about so many people doing it they couldn't all be wrong. We're excited to be back in New England, although dreading being back in a place that gets so much snow, but overall it's a great place to live.

@Alvaro Soto thanks, I'm learning that I need to stop taking advice about things from people who have no experience with said things. And I've been listening to his podcast lately, definitely a lot of great info for our community!