Military Deployment >> Multifamily Rental Investing

10 Replies

Hello BP, I've found myself in a rather fortunate predicament and could use some guidance from experienced investors.

I'll be coming home from a 10-month military deployment with approximately 100k tax free income in the bank.

I've been feverishly educating myself on all things real estate investing and I'm confident that it's the best investment vehicle suited for me.

There are a lot of options on the table, so here are a few parameters:

- VA Loan eligible, but...

- NYC resident with NYC residency requirement for work

- Focused on OOM investing (particular interest in Rust Belt for a variety of reasons: Pitt, Cleveland, Cincy etc.)

- Student loans paid off. Zero debt overall and credit in good standing (thank you Uncle Sam)

My first instinct is to house hack with the VA loan, but with the residency requirement for work, the NYC market severely limits me from finding a deal that makes any sense. 700k+ cash flow negative duplexes in Staten Island don't do the trick for me!

If I put off using the VA Loan until it makes sense (perhaps after a correction to the NYC market), my immediate plan would be to find a cash flowing 4-plex in the Mid-West and BRRRR it. I also have a very solid biz partner which could help speed up the scale process.

What would you guys suggest? How would you get started in my situation?

Thanks and exited to join this community!

Best,

Dan

You can always not use the VA loan, and instead do a conventional loan with a larger down payment to reduce the leverage on a NYC purchase so you are not cash flow negative. Increasing leverage increases risk, and thats why you will almost always be cash flow negative in high demand areas if you are doing zero down VA loans.

@Daniel Clark

Hold off using your VA Loan until you get posted somewhere like DC where the VA Limit is really high.

Lots of banks will allow you to put down only 3-5% down for a conventional loan if you are a service member PCSd to a location.

Thanks @Russell Brazil and @William Matory . I think holding off on the VA Loan is going to be the plan. The expensive local market (high price to rent ratio) and the two different residency requirements (VA & Work), make it difficult.

Will look to spend capital out of state and will suck it up as a renter for now...

What’s your long term goals? 

 Maybe you could use place it inside a syndication?

      If long term rentals are your goal and you have 100,000 for a down payment plus reserve set aside, I’d recommend looking for a 5-15 unit multi family in a stable market.  

Account Closed I'm looking to buy and hold through the next market cycle, and BRRRR to have liquid capital on hand. Long term, I'm focusing on triplex/fourplexes until I can make the jump to larger multi-family/apartment complexes. I've thought about getting in on a syndication, but like the challenge and learning experience of taking the lead on my own project. Definitely have an open mind though...

For the 5-15 unit, I assume that will take me in the realm of a commercial loan...think that will be an issue for a first time buyer? Thanks!

Originally posted by @Daniel Clark :

@Eric C. I'm looking to buy and hold through the next market cycle, and BRRRR to have liquid capital on hand. Long term, I'm focusing on triplex/fourplexes until I can make the jump to larger multi-family/apartment complexes. I've thought about getting in on a syndication, but like the challenge and learning experience of taking the lead on my own project. Definitely have an open mind though...

For the 5-15 unit, I assume that will take me in the realm of a commercial loan...think that will be an issue for a first time buyer? Thanks!

My first property was a 6 unit commercial.  In some ways getting a commercial loan is easier.  Commercial is based on the asset itself and not as much on you as a buyer.  So a good deal is easy to get funded.  

   Honestly, with 100k in the bank you are already there to make the jump to medium sized multi family.   

I agree with the decision to hold off on using your VA loan. I'm military as well and have used FHA loans in the past instead of VA. Your reasoning makes solid financial sense.

As mentioned above you could easily target small commercial properties or four-plexes if you preferred. I’m living on the western edge of where you are looking (Louisville, KY) and I’ve seen a lot of interest in this area. Sound you need some eyes and ears over this way to evaluate a property feel free to reach out. In the meantime, stay safe and good luck as you continue your investing journey!

Hey @Daniel Clark !

I agree with @Allan Bishop Jr. 's assessment of the Louisville market. There has been a lot of investment activity, both on the residential and commercial side in recent years. The benefit of the Louisville market is the cost of living is reasonable, it's centrally located (UPS and FedEx both have a strong presence here) and there's more opportunity to acquire cash flowing properties (the median price of a SFH is $162,800). As a commercial broker and real estate investor myself (currently house-hacking a 4-plex), I'm a huge fan of commercial real estate and the opportunities it affords investors. Unlike residential real estate that's appraised based on comparable sales (i.e. comps), commercial real estate is appraised based on its ability to produce income. Therefore, if you purchase a property that is under performing, update the property and raise rents, you're able to "force" the appreciation of the building. Some of the best books I've read pertaining to commercial real estate investing include:

  1. "Multi-Family Millions: How Anyone Can Reposition Apartments for Big Profits" by David Lindhal
  2. "Crushing it in Apartments And Commercial Real Estate: How a Small Investor Can Make It Big" by Brian Murphy
  3. "The Book On Rental Property Investing" by Brandon Turner
  4. "What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures" by Frank Gallinelli
  5. "Aggressive Tax Avoidance for Real Estate Investors: How to Make Sure You Aren't Paying One More Cent in Taxes Than The Law Requires" by John T. Reed

These books should give you a solid foundation off which to begin growing your commercial real estate portfolio. Hope this helps and good luck on your investment journey!

All the best,

Thanks @Allan Bishop Jr. and @Raphael Collazo ! Louisville seems an interesting market, will certainly take a look. I also see the pros to commercial for sure. Love the idea of repositioning apartment buildings and letting the income dictate the appreciation. My thoughts on holding off are mostly influenced by higher commercial interest rates. Will have to do some deal analysis in the region and see how fourplexes w/conventional loan compare to some smaller apartment buildings w/commercial loan. Brandon Turner and David Greene's books (Long Distance Investing...awesome read!) mainly focused on the former, but super interested in the Dave Lindhal and Brian Murphy books on apartments. Much appreciated!

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