Expert Advice Sought

2 Replies

Good Afternoon,

I am new to the Bigger Pockets community and joined roughly a month ago after a friend recommended this site. I have to say it is a phenomenal resource and a great wealth of information, it is a pleasure to become part of such a community.

I am seeking expert advice as I am somewhat of a novice when it comes to actual real estate investing. I will admit with a bit of hesitation, that I have spent $10,000 dollars on "gurus." I have also completed five real estate appraisal courses, read many books and dedicated the past year to learning as much as possible about real estate. I can honestly say with a great deal of confidence, I am beginning to understand quite a bit about the real estate industry. Moreover, I am beginning to understand how much I don't know about the industry.

After nearly 13 years of active duty military service I am getting ready to "get out." I have three children who's lives I am determined to spend more time molding and I am determined to build a better financial future for them. Along with this decision of course comes the fact that my earned income will be dropping significantly.

My question is somewhat complex and multifaceted, and I will make my best effort to keep it as clear as possible.

I live in a property that I am in the process of inheriting from my Uncle who is in a rest home. I have been living in the house for 3 years and I'm currently fixing the property. I have put about $20,000 dollars into the property, which is a substantial amount for me at this point. However, in order to complete a full rehab on the property I will need to pull out some of the equity and make some serious repairs.

The property has $50,000 dollars left on the current mortgage right now. I had an appraiser perform a subject to appraisal and he said that with a fresh coat of paint and some other cosmetic repairs, the property would appraise for $300,000 at this point in time on the market. Once the first phase of rehab and re-finance is complete, I could then complete a full rehab and possibly force appreciation even higher to the $400,000 - $450,000 dollar range.

My current plan is to take over the property I live in, re-finance, pull out equity, and rent out that property. Then, find a quadplex in North San Diego, put 5% down (with the equity from the first home), live in one unit and rent the other three units. However, I can't currently qualify for a conventional VA loan not due to credit (750), but a fair amount of debt ($20,000) and very high child support as the only working parent.

It is my understanding that residential properties (even fourplex units) cannot use current tenants' income to qualify for a loan (please correct me if I am wrong.) However, this is the only viable option I can see working.

With one year left of active duty pay left, time is of the essence and I would be very grateful if you folks could help point me in the right direction. The equity in that property is all I have to work with at this point, so I must make it count.

My question to you all is, how would you invest this money in this situation? In your opinions, is my plan a sound one. Any and all advice or methods to make this work profitably will be greatly appreciated; and that would be an understatement.

Respectfully,

Warren

@Warren Chadwick  

I think you have a great opportunity here. One of the things I wish I would have done when I started was not try to buy so many properties at once, specifically because of my cash flow from my income, as well as my cash reserves. Now, I am not usually someone who likes to sell assets, but I am wondering here if you can put roughly $30k or so into the house with your initial refi, and it would appraise for $300k or so, why not just flip the house, take your $180-200k and at that point you can have a good chunk of money for cash reserves (3-4 months... let's call it $20k), pay off your $20k debt, then buy your quad-plex home with VA or FHA loan.

Now you have the personal credit card debt gone, you have substantial cash still left to buy another rental house if you like, or hold for a year or two and buy another quad-plex.

My concern here is you build it correctly from the beginning, don't be saddled with the debt and things that are a burden when you can start fresh with a much more comfortable trajectory. Hope that helps.

Nathan,

Thank you for your input. I think this is exactly whatIam going to do after I clear up the title and set this up properly. I really do appreciate the ideas brother, best of luck to you in your endeavors.

Warren

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