Strategies for Maximizing Benefits to Acquire Properties Quickly

17 Replies

Hello All,

I am about a year away from completing my active duty service in the Marine Corps. I am seeking advice on how to maximize the benefits of the Post 9/11 GI Bill, BAH, and any other advice to kickstart my future career in real estate investing.

I am looking for the best advice and strategies that you can give that would help me to accumulate properties fast and smart.

I am going to be getting into this business with another marine that is getting out the same time as I am. So I would have essentially double the money.

Thank you in advance for your responses!

House hack with the VA loan. You can buy up to a fourplex with Zero down (if you wish) on the VA loan. Closing costs can be folded into the loan and in some cases upgrades can be too. I.e.- energy efficient window installs or what not. I always recommend putting in a down payment, if only to buy down your rate. But with VA loans even if you put no down payment there is no PMI added to your mortgage. Additionally you can have more than one property with the VA loan so long as you do not max out your entitlement. Once you do that, you have to either refinance one of your properties into a conventional or commercial mortgage and then you can keep on investing with the VA loan. Once you get 8-10 mortgages though you will have to move on to private money, hard money, cash purchases, or commercial loans. But then again, that is a good problem to have.

Also, Marine is always capitalized but you know that. So I will assume the shift key had a malfunction...  ;) welcome to BP!

That's awesome man, I'm also a Marine from Southwest Minnesota, got out late 2016 and have been working at a very similar goal.. Been working factory work to get w2 income, but I got my 1st place secured here in New Ulm. Still learning, making mistakes, and accumulating capital to continue to make moves. It's a long journey man haha. Welcome to the adventure!

@Collin Schreyer @Travis W. There is an ideal strategy and it IS NOT what 99% of people will recommend.  For example, @Will Wiggins advice is what people typically do and It's a good back up plan, but there is a more savvy way that will pay off huge on your 3rd purchase.   

The key to starting quickly is maximizing your low down payment multifamily purchases. Most buyers only get the opportunity at 2 but they use the wrong strategy and they only get 1 low down payment multifamily loan. As a Vet, you can get 3 if you do it right or 2 if you do it wrong. The wrong way is to start with your VA loan, that loan should always be your 2nd loan not your first and here is why.

As a Vet, you qualify to purchase up to three 2-4 unit houses with as little as 8.5% down Across all 3 purchases, but you can ONLY do this if the first loan you use is the 5% down conventional loan. This loan is little known in the marketplace because most loan officers do not offer this loan and most are not investors so they don't look for the little wrinkles in the guidelines. This 5% option is only available to you if you do not own another home when you close. This means if you lose this option if you purchase a home using your VA benefit as you first loan. You do not, however, lose your VA benefit if you own a home using a conventional loan first. Your 3rd loan can be an FHA 3.5% down loan and now you can own three duplexes with 8.5% down.

Alternatively, if you start with your VA loan first your 2nd purchase would be the FHA 3.5% down, which is not bad, but the problem is that for your 3rd purchase you would have a minimum of a 15% down payment if you purchase a duplex and 25% if It's a 3-4plex. So, here's the math:

Usual Strategy

1. VA = 0% (1-4 units)

2. FHA= 3.5% (1-4 units)

3. Conv= 15% (duplex only)

Total= 18.5% down

Ideal Strategy

1. Conv= 5% (1-4 units)

2. VA= 0% (1-4 units)

3. FHA= 3.5% (1-4 units)

Total= 8.5%

The most important thing you need to do right now is starting preparing your credit.  The 5% down conventional loan is hard to qualify for and where I see most new borrowers fail with this strategy is they do not have the credit depth or history to qualify.  My brother was 82nd Airborne and I've worked with a lot of Vets and one universal issue I have found is the military environment is not conducive to building and maintaining credit depth or history.  I appreciate your service and would be more than happy to help both of you for no charge get your credit squared away.  It is important to start now because the history portion takes time, no less than 1 year and more is better.

I wish you both luck and if you would like help with getting credit ready, please PM me.

Tim Swierczek, Lender in WI (#103522) and MN (#103522)
(651) 772-9000
Originally posted by @Antoine Martel :

Collin.

Sounds like a great plan and thank you for your service.

Where are you looking to invest? Locally or out of state? 

 I am going to start in state because I already have one deal lined up for me. In the future, I want to study the market and travel wherever it is best.

Originally posted by @Will Wiggins :

House hack with the VA loan. You can buy up to a fourplex with Zero down (if you wish) on the VA loan. Closing costs can be folded into the loan and in some cases upgrades can be too. I.e.- energy efficient window installs or what not. I always recommend putting in a down payment, if only to buy down your rate. But with VA loans even if you put no down payment there is no PMI added to your mortgage. Additionally you can have more than one property with the VA loan so long as you do not max out your entitlement. Once you do that, you have to either refinance one of your properties into a conventional or commercial mortgage and then you can keep on investing with the VA loan. Once you get 8-10 mortgages though you will have to move on to private money, hard money, cash purchases, or commercial loans. But then again, that is a good problem to have.

Also, Marine is always capitalized but you know that. So I will assume the shift key had a malfunction...  ;) welcome to BT

This advice is solid! summed up: start small, improve the property, use up your VA loan's entitlement, and just scale up from there, Correct?

Haha, I blame my senior drill instructor!;)

THANK YOU

Originally posted by @Travis W. :

That's awesome man, I'm also a Marine from Southwest Minnesota, got out late 2016 and have been working at a very similar goal.. Been working factory work to get w2 income, but I got my 1st place secured here in New Ulm. Still learning, making mistakes, and accumulating capital to continue to make moves. It's a long journey man haha. Welcome to the adventure!

 Oh, no way man! It's awesome to have someone with similar goals that nearby. Hopefully, we can meet at a RE meet-up sometime in the future and help each other out.

Collin

@Tim Swierczek

Now that my family knows about my future plans, one of my older family members has offered an interesting property that is one small house and next to that small house is a building with two apartments. It's a Triplex. It is totally paid off, in great condition, but he is tired of managing it and offered for me to buy it from him for very cheap, no money down at 3%. Since it's family, he told me we could just do a title change and pretty much cut out the bank if I understood him correctly.

Knowing this information, it is possible for me to add 1 more property to your strategy, correct? I know that this is an opportunity and I am going to jump on it. I have no excuse since I still have a year to prepare. Also, since the bank isn't involved I really don't have to worry about credit on this deal, correct?

I will PM you for advice on credit.

Huge Thank You,

Collin

What are your plans with the GI Bill? If you're planning on being a full-time student while starting your real estate career, you may run into snags getting a loan because you won't be able to show income (the BAH and stipend won't count). If that's the case and you're staying local, consider qualifying for that first loan (or two if you're able to do the 5% down and then a VA) while you're still active and can show that income.

Kevin is spot on here. You will need a w.2 most likely to qualify for all of these loans since most are sold to the secondary market and will have qualification issues if there is no W-2. You could still use GI Bill and work full time. Online courses for basic starting classes count to meet BAH qualification and can be accomplished while working.

Also remember is you have any VA Disability you can get VA loan funding fee waived so if you think you will have a VA finding definitely move the VA loan to after the VA is done.

I enjoyed shipping you Marines for 28 years in the Navy. You were usually nice passengers. ;)

@Collin Schreyer   You should absolutely take that deal.  It would disqualify you for the 5% conventional, but that's ok, this financing deal is better, so no you don't get a 4% low down payment deal from this structure but do you get a better first deal than through normal financing options.  Obviously, make sure this deal cash flows enough to make it worth your 3% investment and your time but if so, take the deal and get going.

Tim Swierczek, Lender in WI (#103522) and MN (#103522)
(651) 772-9000

@Tim Swierczek - great strategy that I have not heard or read elsewhere! I have one question: to qualify for the FHA at 3.5% down, don't you have to personally occupy the residence? I ask because I used a VA loan for my current residence and now am looking to buy a SFH or Multifamily home. Can I use the FHA option being that I already live in my home using a VA loan? If not, any suggestions for financing with low money down?

804-8293753

@Cameron Peters FHA loans are only for individuals who plan to occupy the property after purchase. The only way you can use the FHA loan is if you move out of your current home and turn it into a rental property and move into the new home you are purchasing.

Tim Swierczek, Lender in WI (#103522) and MN (#103522)
(651) 772-9000

@Tim Swierczek I haven’t heard about 5% conventional loans until. Are there strict regulations to qualifying for one?

I am currently residing in a home I used my VA Loan for, house hacking it, and in the process of looking for another property (preferably a multi-family) to use my FHA Loan for. But would it be a better idea to try and utilize conventional 5% down first, refi the VA Loan to conventional when able, and then use the ideal strategy you mentioned?

1. conventional
2. VA
3. FHA

A lot of good information in this post. Thanks.

Disregard I just re-read your whole spill. Definitely a strategy I wish I would have known about before. Since I’d already own a home, I would not be able to qualify for the 5% down. Cool stuff though!

@Travis W. @Collin Schreyer Glad to see other post-military guys getting into real estate around me. I'm originally from Owatonna MN and just recently bought my first Duplex there, I don't get out of the Army for another Year and half but hopefully Ill run into you guys one day!

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