First deal, $250K in Chattanooga, TN , what do you all think?

Question

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Chattanooga.

Purchase price: $250,000 Cash invested: $6,500

2 Bed 1 Bath Duplex
Current house hack ($1150/unit) (1 occupied)
When fully rented out will bring in @2300/month at least
VA loan $0 down
Built in 1969, great location near busy road for prospective tenants, foundation great condition.

What made you interested in investing in this type of deal?

In my opinion, great property that was renovated with new flooring and brand new fixtures/appliances. Foundation is in great condition, gives a little value add potential with certain aspects, however main reason for getting this was for cash flow. House equity is an afterthought as I plan to hold this at least 10 years if possible.

A little on the pricey side if you ask me, however with all of the renovations and cosmetic touchups that were added this was pretty turn-key

How did you find this deal and how did you negotiate it?

Rockstar agent helped find this deal, unfortunately had to get it at market price @ 250K due to this property being in fantastic condition compared to other properties in this location.

How did you finance this deal?

VA loan $0 down

How did you add value to the deal?

Still currently attempting to add value as this is my first Real estate investment. Completely re-did the yard with great landscaping and great grass, looks like an emerald gem compared to the properties around it, added shrubs to the front as well to give it more home feel.

Will not do anything significant regarding value-add as I do not want to do the leg work for the rest of the neighborhood.

What was the outcome?

Been owning for a few months now, great tenants on the other side makes my life alot easier. Had a few plumbing issues with the pipes being clogged due to hair clogs from previous owner/tenant, hopefully this doesn't resurface. For now it seems fine will be keeping close eye on it.

Unit I was living in had AC unit go out , so I had to buy a new one and have it installed for $5K. Nothing surprising, but regarding foundation haven't had any issues.

Lessons learned? Challenges?

Plumbing is one that is a pain to deal with, however it doesn't look like anything serious according to the plumber, all PVC throughout , besides some of the hookups are cast-iron leading to the PVC. Providing no one flushes wipes we are all good! :)

definitely learning alot regarding plumbing/foundation and just general maitenance with the property.

This is the nicest residential duplex I've seen and I had to pull the trigger on this one when comparing this to other properties I looked at.

Jorge Crespo · Answer

Thanks Bill, I am aware of the 2% rule , and I made the decision to give that leniency as it is hovering right around the 1% side of things. I know I paid a premium to get this property but my plan is to keep building up cash reserves and use this property in particular as my foot in the door.

In the future, after my 2nd property (which I plan to get possibly in 2020) , on the 3rd property I'm going to try to focus on the BRRR method and start to get slightly distressed properties and rehab them like that, however I won't be fully capitalized for that until possibly 2021-22.

I appreciate the response and feedback, good luck to you as well!

Bill O'Donnell · Answer

@Jorge Crespo

Thank you for your service.

Welcome to real estate. Congratulations on your first purchase.

The va no money down loan is an awesome tool. Glad to see it being used.

I don't know your area, but in general I try to buy properties that are between 1 and 2 percent. Research 2% rule if you have trouble understanding what I mean. Having said that, you are in good shape based on condition and the fact that you have so little money tied up in this deal.

Welcome aboard. Best of luck. Enjoy your new home.

Joseph Bagley · Answer

True... I used a VA for my first loan. Refi'd with a IRRL (?), then HELOC and not refi'd into a coventional load. Now my VA free again. Here in Cali $680k is max. Like @Jorge said you can have up to a 4 unit as long as you live in it. Look into VA Vendee loans too for us Vets for investing in non occupied.

@Jorge Great buy man! Plus 1 for the Vets! You encourage others!

Jorge Crespo · Answer

Hi Andrew, I agree, I'm going to use this as a platform to spring forward!

And technically it's in Redbank, but the very edge of it. It's about 5 mins from Northgate and the busier side of Hixson.

Did you wait for your capital to build up to buy the other properties outright or did you guys just save enough for a downpayment for those properties?

Andrew Bresee · Answer

@Jorge Crespo

Congrats! The nice thing about House hacking is that even if the deal isn’t perfect, it still helps your living expenses a ton and therefore springs you forward in the money journey.

What part of town is it in? With that price, for that size, I’m assuming either Northshore or Red Bank?￼￼

We own 3 duplexes and one of them is a house hack in Brainerd. We just bought a single family and are rehabbing that as well.

We used the house hack and job savings over the last two years to buy one of the duplexes and the single family, both recently. Could not have done it without decreasing our living expenses and taxes via house hack.

Jorge Crespo · Answer

Appreciate it!

Jorge Crespo · Answer

Hi Andres, no, that is with me at another property. Right now I'm -$200 a month because I'm occupying that one side.

$500 cashflow is projected for when I leave and worst case scenario have to set aside alot for capex and rents stay static etc.

Andres A. · Answer

@Jorge Crespo congrats on your first purchase! You have $500 cash flow while living in the duplex?

Jorge Crespo · Answer

Hi Steve,

Providing you are either a veteran or actively serving it CAN be used for first time home buyers, but generally can be used for any residential property to include properties up to 4 units.

You can also get multiple VA loans however you have to live in each property for at least a year before you go for another. (Owner occupied)

And another stipulation is total VA loans can't exceed an amount ~500K generally as a sum of all of your VA loans. I don't have the exact number but ~500K total VA loan would be a good number to use as a guideline.

Hope this helps!

Steve O. · Answer

@Jorge Crespo is the VA loan for first time buyers?

First deal, $250K in Chattanooga, TN , what do you all think?

First deal, $250K in Chattanooga, TN , what do you all think?

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