Need guidance on investing strategy

12 Replies

I am active duty and have a decent amount in my TSP. Thinking of taking a loan out to fund a turn-key property. If the numbers held even close to what the company is putting out on the turnkey, I would only be out of pocket $100-$200 a month which ive already removed liabilities to free up cash. I know its not the best way to go as an investment but, would it be better to get a property now with a virtually interest free loan (interest is paid back into account) that will be paid back in 5 years. The larger the loan the less likely a rental is an option vs a flip.

@Zacharee Carmack not a bad option for your first property. Which turnkey companies are you considering and what markets? Also, I've seen a lot of active duty military members purchase properties in each area they live, rent it out to fellow military members when they are deployed or stationed elsewhere, and repeat. 

Got it. Congrats on getting a property in Va Beach. I'm in the Raleigh area but have a lot of experience with Rent to Retirement and have vetted several others. Happy to chat offline about my experiences if it would be helpful. Just PM me. 

@Zacharee Carmack I'm also active duty and I'm a real estate investor. Turnkey is a great way to get started in real estate, however, I recommend you make sure your personal finances are solid before buying real estate. How much do you have in cash reserves that you could set aside for this property while still having cash set aside as an emergency fund? How painful would it be for you to have to pay $1000 for a new water heater 6 months from now if something like that happens?

The turnkey provider may tell you that you won't have any Capex, repairs, or maintenance for years, and if they do, you should look for a different company.

I have purchased 3 properties from a fantastic turnkey company, and you must be absolutely certain you trust the people running the company. It's very easy to take advantage of out-of-state investors that want to buy turnkey. The buyers/investors are usually people who don't live near the property, don't know much about property's location, and don't know much about real estate in general.

The TSP is a fantastic way to build wealth (like real estate), but I'm not sure I would borrow against it for something like this. How long would it take for you to save up for the down payment if you didn't use your TSP?

I'm happy to chat more about my experience and provide any additional insight I can. Good luck and keep us updated on what you decide to do!

@Douglas Spence it would take a few years to save up all of the cash along with having the emergency fund. We are building the emergency find slowly. I have the mindset of trying to do something is better than nothing, with proper knowledge of-course. 

Originally posted by @Zacharee Carmack :

I am active duty and have a decent amount in my TSP. Thinking of taking a loan out to fund a turn-key property. If the numbers held even close to what the company is putting out on the turnkey, I would only be out of pocket $100-$200 a month which ive already removed liabilities to free up cash. I know its not the best way to go as an investment but, would it be better to get a property now with a virtually interest free loan (interest is paid back into account) that will be paid back in 5 years. The larger the loan the less likely a rental is an option vs a flip.

I love the mindset you mentioned of doing something is better than doing nothing, but I would advise a bit of caution.  Don't be reckless and in a hurry.  There is time to be patient.  A solid investment can be found in any market and at any time, but it does require the discipline of making sure you understand the investment you're making and more importantly, you trust the people you are working with.

Turnkey is just a marketing term.  It doesn't mean a thing anymore when you go to compare and contrast opportunities.  You need to make sure that your expectations of a turnkey property are exactly what is delivered.  Unless I read something incorrectly, you stated that if the company you are speaking with comes close to their numbers, you would only lose $100-$200 monthly.  Did I read that correctly?  

There are a few reasons to lose money on an investment property, but most of them pertain to experienced investors. As a new investor, if your expectation is a minimal monthly loss, but the numbers on a piece of paper have to be spot on, I would again advise caution. I don't go as far as Douglas Spence does with notion that no vacancy, no Capex or maintenance statements are a reason to walk from an investment, but you should be asking questions of how and why. How is a company going to deliver on the numbers they show? Why does a company show certain vacancy, maintenance and Capex assumptions. Lastly, how specifically do they hit your expectations. You have to put a lot of faith into a company and reputations, proof of performance and specific systems or processes for consistently hitting expectations are all requirements in my opinion if a company wants to earn business.

Now, not everyone holds companies accountable and a lot of investors simply assume that everyone operates the same way.  I can assure you every company is not built the same and every property marketed as turnkey cannot be assumed as renovated or even managed the same way.  I would be careful before buying a property right off the bat, especially with a limited use program, that is going to produce a negative performance on day one and only if all of the numbers are spot on.

Be patient and keep asking questions.  And whenever you move forward and however that looks, I wish you all the best -

Originally posted by @Chris Clothier :
Originally posted by @Zacharee Carmack:

I am active duty and have a decent amount in my TSP. Thinking of taking a loan out to fund a turn-key property. If the numbers held even close to what the company is putting out on the turnkey, I would only be out of pocket $100-$200 a month which ive already removed liabilities to free up cash. I know its not the best way to go as an investment but, would it be better to get a property now with a virtually interest free loan (interest is paid back into account) that will be paid back in 5 years. The larger the loan the less likely a rental is an option vs a flip.

I love the mindset you mentioned of doing something is better than doing nothing, but I would advise a bit of caution.  Don't be reckless and in a hurry.  There is time to be patient.  A solid investment can be found in any market and at any time, but it does require the discipline of making sure you understand the investment your'e making and more importantly, you trust the people you are working with.

Turnkey is just a marketing term.  It doesn't mean a thing anymore when you go to compare and contrast opportunities.  You need to make sure that your expectations of a turnkey property are exactly what is delivered.  Unless I read something incorrectly, you stated that if the company you are speaking with comes close to their numbers, you would only lose $100-$200 monthly.  Did I read that correctly?  

There are a few reasons to lose money on an investment property, but most of them pertain to experienced investors. As a new investor, if your expectation is a minimal monthly loss, but the numbers on a piece of paper have to be spot on, I would again advise caution. I don't go as far as Douglas Spence does with notion that no vacancy, no Capex or maintenance statements are a reason to walk from an investment, but you should be asking questions of how and why. How is a company going to deliver on the numbers they show? Why does a company show certain vacancy, maintenance and Capex assumptions. Lastly, how specifically do they hit your expectations. You have to put a lot of faith into a company and reputations, proof of performance and specific systems or processes for consistently hitting expectations are all requirements in my opinion if a company wants to earn business.

Now, not everyone holds companies accountable and a lot of investors simply assume that everyone operates the same way.  I can assure you every company is not built the same and every property marketed as turnkey cannot be assumed as renovated or even managed the same way.  I would be careful before buying a property right off the bat, especially with a limited use program, that is going to produce a negative performance on day one and only if all of the numbers are spot on.

Be patient and keep asking questions.  And whenever you move forward and however that looks, I wish you all the best -

 Thank you for the insight Chris, I actually have a scheduled call with someone from your team soon. 

@Zacharee Carmack I think it's a great way to get started in real estate.  And yes many argue that the equity is taken out of these up front which is mostly true.  However, it allows you to get in the game and gain confidence to do bigger and better things, which you have already started to do.  As stated above, the key is to really do your research and vet the providers.  None of them are perfect, but make sure that the one you select is truly providing you a turnkey product and that they provide you a good quality property manager.  That is key for these.

I know others who have used a TSP loan to start or continue their Real Estate journey. Great rate, that you can't really beat. Only negative is that $ won't earn interest while it is loaned. Basically I think of it the same as a HELOC or HEL, borowing money to earn a higher return!

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