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New to Bigger Pockets and Real Estate Investing

Reymon Hernandez
Sacramento, CA · Member since 2016 · 15 posts · 8 votes

Hello BiggerPockets Community, my name is Reymon Hernandez. I am new to the BP community and I am also new to the real estate investment world. 

I am currently a licensed Realtor in Sacramento CA. and after several years of helping local families buy and sell homes I have decided to take a more serious look at RE Investing. 

This year I worked with several 1031 exchange clients which forced me to learn more and dig deeper into the benefits of a 1031 exchanges. This got me really interested in learning about all of the benefits of owning rental properties and such. I have now decided that while there is great potential in helping families buy and sell real estate, there is greater potential in actually owning/investing in it. 

My Current Situation: 

My wife and I moved in with her parents recently to be able to save enough money to purchase our own home (SFR). However, I have successfully convinced my wife that buying an owner occupied multi unit property such as a duplex would be the best way to go for our financial future (It was not easy, but I did). 

We have a small amount of money saved up and have been getting our financing in order to buy a multi unit property, I am a veteran with VA Eligibility which allows me to buy up to a 4 unit property under $417K with no money down. However, I do not know if that would be the best way to go for this situation. As a realtor I could represent myself in the purchase and use the commission funds to put back into the property with an approved VA Loan. However, I have a few question I would love to get some help with.

Question: 

1. Would you recommend buying a multi family unit before buying a SFR (or vice versa) and why?

2. Would an owner occupied VA no money down loan be a good way to go or should I consider looking at some of the other financing options discussed in the podcasts and webinars, since we do have some money to put down?

3.  What major things should I consider aside from the cap and the cash on cash return when purchasing an owner occupied property?

4. What tips would you offer a newer person like myself starting off now or if you currently own properties in CA. What should I be aware of before becoming a landlord in CA.?  

5. Lastly what are REA meetings and where do I find one? I have been hearing speakers on podcasts talk about Local REA meetings and I hate to admit that while I am in Real Estate I do not know what a REA meeting is. Dont even know if I am spelling that correctly. 

Sorry for the long post, but if you have read through this entire thing I would love to get your thoughts or inputs on any of the things I brought up. It will be greatly appreciated. I am happy to be part of this wonderful community and look forward to getting everyone or anyones feedback. 

Thank You!

-Reymon

1Reply
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Most Popular Reply

Wes Blackwell
Real Estate Agent · Phoenix, AZ · Member since 2016 · 738 posts · 1k+ votes
9y

Hi @Reymon Hernandez! Great questions! Let me see if I can help:

  1. It is really going to depend on your individual needs and goals, as well as your wife's. I tried to do the same thing recently with my significant other, but she wasn't having it! And as they say, happy wife = happy life. But from strictly an economical and investor-minded standpoint, multifamily properties always win. Even if you don't cash-flow, they can significantly reduce your mortgage payment and allow you to store extra money away to pay down debt or save for future investments. Plus once you move out you'll more than likely see a positive net at the end of each month, and that's much less often the case with single family homes here in Sacramento.
  2. Once again, that's going to depend on your situation. VA will allow for maximum leverage to get into the property cheaply, but you'll likely have a higher interest rate than if you put 20% down on the property. It can also affect your cash flow in the long run. Lastly, it doesn't look like interest rates will be going back down any time soon, so thinking you'll be able to refinance for a lower interest rate in a few years probably isn't a good game plan. Ultimately you'll have to go with your gut and choose the option that makes the most financial sense for your family.
  3. Crime rates, school districts, are the rents high or low for the market? Has the been any deferred maintenance? Is there a large capital expenditure coming up soon (like less than 5 years left of the roof)? What is the appreciation rate for the area over the last 5 years? How does that compare to other areas of Sacramento? Are there any new commercial developments being built that might impact the area? These are just some of the additional things you'll want to consider when analyzing a property.
  4. Get educated. In fact, since you're a Realtor you can take advantage of the holiday sale going on at the California Association of Realtor's website. You can get the property management course bundle to earn the Property Management Certification along with the C.A.R.'s Guide to Property Management all for under $300. Also check out Bigger Pockets books on rental property investing and management that you can find here.
  5. Meetup.com under the Career and Business Category. REIA stands for Real Estate Investment Association. You'll find several groups in that category on that site. Be aware that you might endure a sales pitch in attending, so leave your wallet at home the first couple times. But there are definitely some local investors there to connect with. The Roseville Meetup seems to be pretty popular on here and is having an event coming up on January 10th. David Oldenburg runs the group and is a member on here, so perhaps he'll see this and chime in.

Never stop learning, and best of luck!

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  • Wes Blackwell
    Real Estate Agent · Phoenix, AZ · Member since 2016 · 738 posts · 1k+ votes
    9y

    Hi @Reymon Hernandez! Great questions! Let me see if I can help:

    1. It is really going to depend on your individual needs and goals, as well as your wife's. I tried to do the same thing recently with my significant other, but she wasn't having it! And as they say, happy wife = happy life. But from strictly an economical and investor-minded standpoint, multifamily properties always win. Even if you don't cash-flow, they can significantly reduce your mortgage payment and allow you to store extra money away to pay down debt or save for future investments. Plus once you move out you'll more than likely see a positive net at the end of each month, and that's much less often the case with single family homes here in Sacramento.
    2. Once again, that's going to depend on your situation. VA will allow for maximum leverage to get into the property cheaply, but you'll likely have a higher interest rate than if you put 20% down on the property. It can also affect your cash flow in the long run. Lastly, it doesn't look like interest rates will be going back down any time soon, so thinking you'll be able to refinance for a lower interest rate in a few years probably isn't a good game plan. Ultimately you'll have to go with your gut and choose the option that makes the most financial sense for your family.
    3. Crime rates, school districts, are the rents high or low for the market? Has the been any deferred maintenance? Is there a large capital expenditure coming up soon (like less than 5 years left of the roof)? What is the appreciation rate for the area over the last 5 years? How does that compare to other areas of Sacramento? Are there any new commercial developments being built that might impact the area? These are just some of the additional things you'll want to consider when analyzing a property.
    4. Get educated. In fact, since you're a Realtor you can take advantage of the holiday sale going on at the California Association of Realtor's website. You can get the property management course bundle to earn the Property Management Certification along with the C.A.R.'s Guide to Property Management all for under $300. Also check out Bigger Pockets books on rental property investing and management that you can find here.
    5. Meetup.com under the Career and Business Category. REIA stands for Real Estate Investment Association. You'll find several groups in that category on that site. Be aware that you might endure a sales pitch in attending, so leave your wallet at home the first couple times. But there are definitely some local investors there to connect with. The Roseville Meetup seems to be pretty popular on here and is having an event coming up on January 10th. David Oldenburg runs the group and is a member on here, so perhaps he'll see this and chime in.

    Never stop learning, and best of luck!

    2Reply
  • Reymon Hernandez
    OP
    Sacramento, CA · Member since 2016 · 15 posts · 8 votes
    9y

    @Wes Blackwell Thank you so much! I did not expect such a thorough response (which is why I asked a lot of questions). This is all great information. I see that you are here in the Sacramento area and also have a real estate license, I'd love to catch up over coffee or something if you're interested. 

    Let me know and again thank you for that, I will be looking at all the information you provided and putting it to good use.  

    0Reply
  • Gordon CuffePro Member
    Investor · Roseville, CA · Member since 2009 · 1k+ posts · 583 votes
    9y

    @Reymon HernandezVA rates are very good so that will not make a difference in the type of loan that you get. the thing you should do first is to see how much of a loan amount that you qualify for because many lenders do not count rental income if you do not have landlord experience . You can send me a email if you have questions about financing or being a landlord as I have years of experience with both.

    0Reply
  • Reymon Hernandez
    OP
    Sacramento, CA · Member since 2016 · 15 posts · 8 votes
    9y

    @Gordon Cuffe Thank you for reaching out. I appreciate the input. I am currently working with a local lender here in Sacramento and have talked about a few details and as you said they do not consider the rental income for the qualification. However, we have looked at the numbers and have a good understanding of what we will be able to qualify for, we just have to wait till after I file my taxes next year. I would love to hear more about what you are doing for your investors and maybe get some input about being a landlord here in our area. I will reach out and maybe we can put something on schedule soon. Thanks again for your response. 

    0Reply
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    9y

    Hi @Reymon Hernandez,

    2. Usually the choice is between FHA 3.5% down w/ FHA mortgage insurance, and conventional 20-25% down w/ no MI. And I generally lean towards conventional, because of the lack of MI. VA loans, however, are awesome and do not have monthly mortgage insurance. Your challenge will be getting your offer accepted. But, hey, as a buyer's agent that's already a huge part of your job anyways, so you're better equipped than most.

    0Reply
  • Reymon Hernandez
    OP
    Sacramento, CA · Member since 2016 · 15 posts · 8 votes
    9y

    @Chris Mason Thank you for your response as well. I do have an intimate knowledge of VA loans and on a normal home purchase I would have very little no problem getting it accepted however my question was related more towards hard money lending and other unconventional financing.

    My reason for asking was due to fact that VA loans have stricter inspection and appraisal requirements and does not allow for me to get financing for damages or repairs. I guess I should have explained that a little more. However, I have been reading and following other posts on the forums and I think that with all the input I have received here, plus all the posts on the forums plus the podcasts I have been listening too, I have a better understanding of which way to go. Thank you. I greatly appreciate your input.

    0Reply
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    9y

    Hi @Reymon Hernandez,

    You can go into escrow intending to use VA, and then switch it. A VA appraisal can be used for a conventional loan, a conventional appraisal cannot be used for a VA loan. Similarly, if the pest report is just too ugly to clear section 1 prior to COE, don't go VA and keep that pest report to yourself.

    1Reply
  • Mark Nolan
    Professional · Carlsbad, CA · Member since 2012 · 12k+ posts · 1k+ votes
    9y

    @Reymon Hernandez

    You have come to the right place to connect with the wide array of real estate professionals and investors. Make sure to view the Bigger Pockets book store: https://www.biggerpockets.com/store

    1Reply
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