Hello all! i will be as descriptive and to the point as possible. I am new to real estate, started educating myself since November of last year, I have possible routes i can take to start my real estate journey but i am seeking guidance on what decisions to make. Im currently stationed in Andrews AFB, Central MD DMV area. At the moment i have multiple options, combined i only have about 4k in capital between my wife and I to use.
Option 1.)Consider waiting a year educating myself more and saving for more capital
Option 2.) purchasing my first property with the Va loan in Baltimore/D.C/or central maryland markets roughly around the budget of 200k max or cheaper, live in and fix till my time is up, then hold as a rental property once I move.
Option 3.)My grandfather currently owns 2 properties in York, Pennsylvania and gave me an offer to purchase his homes below market price. wonder would this be a good investment or stay away? I was told i cannot use my VA for these properties cause its not military related properties if anyone can clear up what that means? and i must live in them which i currently can't.
1st home is detached 2 unit 4 br 2 ba, brick Colonial built in 1902, 2 car garage fenced home, fireplace, but not in use, basement. Cons: my grandfather hack jobbed most repairs. leaking roof, stoop and porch need redone, lower unit kitchen needs complete remodel, 4-5 coats of paint on all walls, reoccurring mold in 1 bedroom and same bedroom needs insulation, upstairs unit you can hear anything and everything, all doors are original that came with the home, also have 4-5 coats of paint on them. small cockroach pest problem (not severe YET), Bathroom needs remodel and sewage lines need repair. Price estimated at 47,000. He stated for the home roughly 2500 taxes yearly (do not quote me, info what he told me). Average rental price for units if i would rent is $667 each.
2nd home, 3br 1 ba Townhouse built 1965. aluminum siding, previously attached, now detached burned in fire 2003. completely remodeled after fire, previously had fireplace but deleted and closed shut. hardwood flooring living and dining area, new carpet in bedrooms, possibly need to redo sewage piping and minor. priced at 43,000, taxes roughly 2500 as well, tenant currently pays $830 rent.
i appreciate the time to look and help, i have pictures and can get more info if requested for any mentors here, if anyone can assist with any guidance or info at all i would really appreciate that and learn as much as i can!! thank you all!
Chris, to qualify for VA you have to be able to intend to live in the property for at least one year. So if you could not ligitimatley commute from your to you duty station it won't work. I recommend not waiting a year you have plenty of options to get started now. When you are buying a house for future rent purposes you have to evaluate morgage and other expenses versus potential rent. Honestly I would really take a hard look at a 4-plex in that area. You don't have to worry about a down payment and you can use the current rents as income on your application. This will allow you to qualify for a larger loan and if you can find a good cash flow property you will be paid to live and buy the property from your tenants with out using you military pay. That being said the property has to be the right one. You can do the same with a 2 or 3-plex as well. It is something to seriously consider. If you have any questions please feel free to ask.
@Christopher Rodriguez I recommend saving, networking, and educating. $4K and a VA loan can get you a property, but it may not be enough to fix anything big that breaks.
First, like @Aaron Lee said (shoutout to Puyallup!), you need to live in the property under a VA loan. So you can't do those properties in PA.
Second, multis are a great way to use VA loans. However, it's usually best to get a local mentor to help walk you through how to do it on your first one. As someone living in DC now, I can tell you there aren't many LEGAL multiunit properties.
Third, the VA loan gives you more than enough rope to hang yourself. Don't get me wrong -- it's an amazing tool to quickly get into REI. But without a couple folks to help evaluate a deal, it is incredibly easy to wind up with a property that doesn't break-even.
We read about successes on here, but not often about the deals that DIDN'T work out.
I agree that you need to learn by doing, but that doesn't mean you should learn EVERYTHING by doing. Seek out a local Baltimore or D.C. network first. Talk with property managers and real estate agents to get a feel for the market.
Keep saving and educating yourself. 4K and a VA loan is going to get you no where except deep into debt.
@Aaron Lee , @Wes S. @Thomas S. thank you for the insight and advice, I do appreciate that. Wes, I did hear horror stories about beginners getting into the game, so I'm definitely trying to tread lightly and make good decisions, I do feel the homes in PA will be a long shot if I don't have any money to put down so thats probably out of the question right now. Aaron, I did find some good multi family homes but they were in pretty sketchy areas here closer to my job in the DC MD area, but until then me and my wife will still get a feel for the area. I was also considering investing in a single family townhome in the Baltimore city area and commuting to work, I saw several reports and heard very good things about potential rising markets, but again I do need better insight from local networks and mentors. Overall, what I am taking home here is, 1. Save more money for future property and when problems arise, 2. Educate myself even more, 3. Network with locals agents, groups, clubs,property managers and potential mentors, 4.Get a better feel for the local markets and my area.
Also, I would like to connect with you all for future information or any questions that i may learn from, if thats not a problem. thank you!
I am not sure what you get with 4k, and VA loan but
I'd say you can get the best education when you are in action.
Unless, you start helping and actively doing something about RE, you will be asking the same question next year.
My worse investment is the first one, and learned from it.
To be honest, It thought me more than my master degree did.
I am not saying jump into it, but find a partner if needed, you will learn more.
@Ozzy Sirimsi , I really much so want to take action and be a “doer”. I’m still focusing on what I can bring to the table for business relationships with potential mentors and agents, I have been reading more and listening to podcasts, etc. I also would like to speak to you as well if that would be possible? I know I’m still new and don’t have much to offer. I just had a very big interest in the Baltimore market as my first property and if I could pick your brain with anything about the local area at all could help very much.
Hello Chris! I agree with @Ozzy Sirimsi, what better time than now. Don't jump without looking of course, rather find a senior enlisted or an O you trust within your chain that has bought few homes with VA loans and ask them for some guidance. Once you've narrowed your choices down, bring them along to do a stink test on the property. Regardless of whether that person in your chain is an investor or not, they can help you navigate the process. If you plan to buy and hold after you PCS to your next duty station, then it will be up to you to run the numbers before purchasing to ensure that the property will + cash flow once you rent (use the BP calculators or get a sanity check from BP nation to assist).
Since you have 4K in reserves, I would ONLY be entertaining an SFR property that is relatively new and turn key. Even if you happened to be the spawn of Bob Villa, that 4K should be saved for emergencies and not rehab...period. Naturally, I too am more inclined to house-hack as @Aaron Lee suggests, but despite if you are able to find a relatively new duplex at your budget, it seems that you'd be putting yourself in a potentially unnecessary volatile situation. Good luck!
Yea, message me and we can meet one day.
No problem at all.
Hello @Matthew Rayl , I have been asking certain leadership and members, no luck on any investors, but I have had a couple of coworkers that have used the VA loan so I will be asking them as well in the coming days. I have also found some nice (appears to be) turn-key properties both Single and Multi Family in Baltimore area. I am definitely choosing wisely with the route I'm going to take. I know there will be many expenses and more could go wrong with multi families with tenants, but roughly how much money do I need In my reserve for expenses in the future if I would purchase a 3, 4 unit ?
Your reserves beginning with your first property should be equilivant to 6 months rent from the property.
For example a 4 plex with rents at $800/month/unit you scould have cash reserves of nearly 20K.
@Christopher Rodriguez As someone who used a VA loan to get into RE (lived in first then rented), I can share some first hand experience with you. As others have said here a VA loan can give you just enough rope to hang yourself with, BE CAREFUL. Everyone says "buying a home is ALWAYS cheaper than renting", that's not always true. In a perfect world it probably is, but sh!t happens and when you own the house the land lord/ maintenance man is not there to help. My first summer living there the A/C crapped out on me and it cost $3,000 to fix/ replace it, fortunately for me I had a home warranty from the seller that ended up only costing me a $60 service fee (I lucked out there for sure!). But if the A/C had crapped out on me the following summer I wouldn't have had the warranty and would have been in a bad spot. Moral of the story if you only have $4k I would definitely recommend going the turn-key route or have a plan to save a bunch of money for the unexpected expenses.
A few other things that are easy to overlook with a VA loan, like the origination fee (I may not be calling it by the right name) on top of the standard closing costs. When I bought this house I was cash poor so I rolled it into my mortgage (about $3,500 if I remember correctly). Your $4k will get quickly eaten up by closing costs and or the VA fee. Also for when you do decide to rent it (assuming you have lived in the property long enough) your mortgage payment will be higher than if you put 20% down. These factors ultimately increased my mortgage payment thus reducing my cashflow to about $0/ month after accounting for vacancy, capex, PM fee, etc. I had no idea I'd ever be renting this house out so those types of things never occurred to me at the time of purchase. Second moral of the story, don't be like me, do your homework and buy smart.
(On the plus side this property has appreciated about $35k since I bought it :) )
Hope this was helpful, let me know if you have any other questions.
@Thomas S. that was definitely the answer I was looking for thank you for that! And hello @Nathan McQueen , that sounds like a hell of a roller coaster, and glad to hear you bounced back from that. I have seen some potential turn key properties but I’m still treading lightly with these up and coming areas. I did have some questions, what if I PCS and I haven’t reached the 2 year limit I have to live in the property for before I rent it out ? Would I pay a penalty or would they ever allow me to rent ?? And so essentially you don’t have the funds at the moment for the fees and closing Cost, you could roll that into your mortgage if the loan permits?? And also when you rent your property there are more fees that are added ?? I apologize for the noob questions, just wanted to clarify lol
Hey Chris, I was stationed at Andrews for 5 years and now live just south of there in Waldorf Maryland. Do you currently own a primary residence home? If not, here is my favourite strategy for military members to use and what I did as well. Use the VA loan to purchase a home as your primary residence with $0 down towards the mortgage. Live in the home for a while then you move into a rental, move onto base or PCS and turn your previous primary residence into your first investment property. The biggest benefit to this method is you get to keep your incredibly low primary residence interest rate of probably 4.25%. If you were to purchase a home strictly as an investment you might pay 7% to 8% interest. This makes the difference between a property cash flowing and not. The other big advantage is you don't have to put any money down.
If you play the game right, you can, in fact, do this at least twice. The VA Loan has a maximum loan amount. In Charles County MD it is $679,650. But you can in fact purchase more than one property as long as all the loans are under this maximum limit.
For example, I purchased a townhome for $210,000 in 2011. I then moved onto base for a year and rented out that townhome. I then purchased a second home for $240,000. Both homes I put $0 down and get a really low VA Loan primary residence interest rate and am now cash flowing about $400 a month from my first property, only owe about $180K on it and it's appreciated in value to about $280K AND the mortgage on my primary residence is far lower then if I were to rent.
Another option and the one I wish I would of done, is to purchase a multi-unit using the VA Loan. You can purchase up to a 4 unit as long as one of the units is your primary residence and the maximum VA Loan limit goes up with the number of units in the home. For example, in Charles County the maximum loan limit for a 4 unit on a VA Loan is about a $1M with $0 down. This is a little more complicated though but possible.
I hoped that helped some.
Thank you for that info @Malcolm Lawson , I do not own a property as of right now, I am currently renting a room in Upper Marlboro, MD, and I’ve been lucky to befriend my landlord as she has been mentoring me as well. So both of those properties fell under the same loan?? Without having to file for another loan?? That’s great! So I know the commute is far from base, but I have had an interest for townhomes in the Baltimore city market. As I keep learning and saving, My problem I’m torn about is, I want a property that will target the young professionals moving to the city. I’ve found single family townhomes ranging from 100,000-200,000, and then I find 3, 4 unit homes in established areas (canton, federal hill, locust point fells point) and also somewhat established (Bolton hill, pigtown, hollins market, etc), but those multiunits are ranging from 300,000 to 400,000, rent in area ranging from 700-1200 a unit, but 0 down and me having a 4K reserve to work with for tenant expenses and fees, my heart says just do it take the risk, have the cash flow pay for mortgage and I save my own money into reserve ASAP, but my mind says not a good idea to buy the multi ill be in over my head, stick to the affordable single family property, hopefully it appreciates and start rent when you leave the property. Malcolm can you or anyone here elaborate if they have ran into this and what aided you with your decision ??
@Christopher Rodriguez Chris, I'm just a newbie myself, but I spent 26 years working in PG County so if you start looking there and need some info on the area, let me know.
Hey thanks sir much appreciated ! And thank you for the years you put in protecting us. I’m still getting used to the area and scoping out the good and the bad, I live in Upper Marlboro, MD near Clinton which I don’t think is so bad, but what areas do you recommend to stay away from??
@Christopher Rodriguez I sent you a pm.
There seems to be a lot of good advice on here so I will make my input brief. Honestly, a VA can get you in trouble but so can ANY loan or mortgage if you don't know what you're doing. The best thing I ever did was purchase a two family property WITH a VA loan. If anything, I put zero down, my tenant pays the entire mortgage and im living for free. My full time job pay (and overtime) goes directly in my pocket. I purchased my property for 265,000. Even as a first time home buyer at 3%, I still would have put down 7,950. Instead, I shelled out a couple thousand for closing costs and now im looking for another property because I've been able to save so much. You have to find a plan that works for YOU. Even if you find a multi family that will cost you 100$ a month after the other side is rented (in my opinion) that's still a win for your first property while you save a ton of money to purchase another property. There are so many ways to win in this game depending on your strategy. If you want to know a little more about my process of buying a MFH with the Va loan, reach out.
Best of luck
much appreciated @Eric G. , I'm learning something new daily with the VA loan and most likely I will be going 0 down and keeping the 4K for reserve. I'm leaning more and more towards downtown Baltimore market, I have an interest in getting townhomes aiming towards college students, young professionals and hipsters, for some reason I just have an interest in inner city townhouses rather than suburb properties, is there any set data on what is a better investment ? but for you so far how has your experience been in the Baltimore market?? Is it safe ?? I was looking in the fells point, federal hill, canton, locus point area, since I'll be living in it for a bit, but do you think my property will appreciate buying a 150,000-200,000 property in an already established area when other growing areas of the city are going for 40,000-100,000 ? I don't plan on living there forever but keeping for a rental, Have you ever flipped in baltimore as well? I've been getting mixed signals from different forums to steer clear of Baltimore and others are praising it. What do you feel about the area?
@Christopher Rodriguez My two homes are different purchases but are both VA loans. Just keep in mind the quality of tenants you want to attract. Do you want C class tenants in Baltimore or would prefer a military family also stationed at Andrews as your tenants? Another thing to consider is there is an advantage to purchasing as much as possible. If you were to purchase a $200K home that cash flows $100 a month in Baltimore after 5 years maybe you have built $20k in equity. If you were to purchase a $400K home in Upper Marlboro that cash flows $100 a month, after 5 years you would have double the equity, maybe $40K. Also, consider appreciation. If they both appreciate 5% in that time period, your $400K home would be work $420K while your $200K home would be worth $210,000. Just some food for thought. Remember the 3 ways you make money with real estate investing: Cash flow, appreciation and debt pay down.
@Malcolm Lawson I didn’t even consider that, yeah Baltimore could be hit or miss, currently where I live it’s also hit or miss near Clinton but I know that’s not completely all PG county. I wouldn’t mind a single family in Baltimore, but if I do invest in this area, I would really like a multi family. So the more expensive the property higher the equity ? How does that work ? Also the debt paydown you were speaking of ? That also is a factor to appreciation?
Hey @Christopher Rodriguez so the more expensive the property the more you will benefit from appreciation and debt pay down. Over the last 100 years, homes appreciate on average 3% a year. So if a $100K home appreciates 3% in one year, then it's worth $103K. If a $400K home appreciates 3% in the same year, then it's worth $412K. Debt pay down is also similar. If you are looking to build as much equity as possible, then purchase a more expensive property. The only dangers to doing that is that your monthly mortgage payments will be higher so your holding cost when you don't have a tenant will be higher. If you buy a multi-unit, that may help since chances are all of your units won't be vacant at the same time.
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