I wanted to get a variety of opinions on getting started in real estate investing. I’ve been doing research looking at both house flipping and rental property investment, and see that either can work and it depends on situation. Because of the vast majority of situations and expertise on BP, I wanted to see what your opinions are, so I can hear the thoughts coming from outside of my brain. Here’s the situation:
I am about to move down to Virginia Beach, VA, and am considering that to be my place to start with my first investment. With access to a the VA loan, I've read how it can benefit regardless of what property type you're purchasing (multi family or single family). I've read that a lot of military folks prefer the house hack, since being active duty may cut into time, from working full time to getting deployed, etc. For both situations, house hack or fix and flip, please assume the below applies to my situation:
1. Either property’s mortgage payment and expenses cost costs less than my housing allowance for the area.
2. $20,000 are available for rehab/etc
3. I will live in either property for at least a year (VA loan)
4. I have a partner who is not active duty military in the area who will be available while I’m deployed, etc, and has experience with several home rehab areas, would have his own full or part time job
5. I will be in VB for at least 3 years
6. I don’t object to starting with a house hack and moving on to a fix & flip later, and vise versa
I am open to all opinions/thoughts/advice/concerns/questions to hear and really get my mind going. Thank you in advance for all of the responses and I look forward to engaging in the discussion.
How comfortable are you living in chaos? That's really the question. Live in flips can be great, but you and your partner are going to need to be ready for a tougher living situation.
@Isaiah Jackson I agree with Nick, if you're comfortable living with chaos then go for it...I would imagine you could actually find both! Why not look for a beat up duplex, triplex, or four-plex and then you live in the worst unit. You could put a little money into each of the units as a tenant changed out, or as the tenants permitted (I would imagine most won't complain about you making their apartment look nicer). You renovate your unit while living in it, and BOOM You have live-in flipped a house hack...you can sell, or refinance/rent when you're ready to move on!
@David Pere @Nick Giulioni we have actually discussed many times that were very okay with making a less than idea living situation work for us. Since I would be able to have someone who doesn't deployments/etc to worry about, I thought a live in flip on a SFR would be a really cool way to start, and giving us at least a year to work on it to both increase value and pay down the loan, and really build some equity, which could really help us start whatever is next (when the time comes). I've seen a lot of military folks don't like live in flip single family because if they get deployed or work gets busy, they don't have the time - but if I can mitigate that with my non military partner, that's something we think could be really good for us
@Isaiah Jackson My vote is to house-hack a multi family property. Live in one unit and rent out the others to cover your mortgage, plus possibly have extra positive cash flow. One caveat however is to make sure it will have positive cash flow once you have to move out of it if you are forced to PCS. Make sure the numbers work as a rental property. You build long term wealth buy owning rental property, not flipping. Flipping will help build some capital, but buy and hold will be your ultimate wealth builder.
@Stuart Grazier I do like the idea of the house hack and how it works long term once I leave. The reason we liked the idea of the live in flip is that we can be where we work, not have to worry about trying to work on units as tenants move in and out, or while they’re living there, and avoid tenant drama really as a whole. We the like idea of the initial gain from a successful (and well thought out) flip, which could help give us a little wiggle room for what we work on next
For the SFR live-in flip, you'll want to double check the VA loan criteria. The VA has stricter finance criteria than some loan programs which may prevent you buying as much of a "project" as you want. Basically, my vote is to buy a duplex, rent out the better side and live in the other.
@Isaiah Jackson - I am going to second what @Jeremy Roberts said. VA loans can be relatively strict on the condition of the property (ie the house needs to be nearly turn key as is before the VA will insure the loan). That severely limits value add options if you are using the VA loan up front. If you do decide you want to do a fix/flip then I would look into using an FHA 203K loan and then refinance out into a VA loan down the road to eliminate the PMI if you plan on keeping the property.
Hello Isaiah. I would definitely go with the house hack and buy a small multifamily (2 to 4 unit) property. Getting in with little to nothing down using a VA loan will allow you to maximize your return on investment. With a traditional VA loan, I think there are also usually limits to the condition of the property, which can sometimes limit your options when looking for a "live-in flip." With buying a multifamily rental (house hack), the extra rental income would offset the cost of your mortgage, allowing you to save more for other investments or use it to make upgrades to the property to charge more for rent if the market will support it. Then, when you have to move, you keep it and continue making even more income. If you can find something that nets enough income to cash flow OVER your mortgage payment while you're living there, then you're golden. Also, if you haven't found an agent in that area yet, I'd love to help you. I'm a licensed agent in Virginia and I work primarily with investors. If you're interested, DM or email me and we can discuss specifics.
Hi Isaiah! I was in the same situation that you were in. I chose house hacking and have been doing it for around 6 months, i love it! It's hard to beat living for right around $100 a month. I thought that it was time to grow my investing and started looking into four-plex's in my area. Thinking I would be able to make a quick second investment by saving my VA loan, i used a conventional loan on my first property. The problem i have run into is that if you are trying to use a VA loan for a multiunit property or a second property (Both situations make you a land lord), lenders want you to have 1 year of landlording experience before they will approve you on a VA loan.
I know it doesn't exactly answer your question, but it is just one more thing to consider before you make your first choice. Flipping is really not an option with a VA loan due to how strict the requirements are.
Get your feet wet with a house hack with the va loan.....on a duplex or triplex... after living there a year ...
Then go for a USDVA loan.....that’s where you can go creative because it’s similar to a va loan
Then go for a zero down loan from NFCU.....
All of these have 1 year residency requirements unless (surprise!) you get stationed somewhere else.
When you do get stationed somewhere else... refi out of your original va loan BUT STILL KEEP THE PROPERTY AND USE IT AS A RENTAL.
Then repeat steps 2 and 3....
Welcome to our neck of the woods! Get your VA approval and go for the hack. Consider AirBnB etc if you go on deployment and the place will be sitting vacant. There are a lot of regulations in our area in regards to that so you will need to make sure the property is compliant. Good luck!
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