All Forum Posts by: Kevin Phu

So I found out about BP about a year ago when I ran into my friend @Ben Biggs who I hadn't seen since Navy boot camp in 2010! Since then I've been learning as much as I could (still learning!) about REI and worked on getting my life settled as I was transitioning back into the civilian world, into a new city, and a new job.

I started my new job on October 1, 2016 and I set a goal to get my finances in order and get into a deal in a year or less. It is now 9 months later and I am potentially going into a contract on my first property! If I end up closing on this property, I will be renting out the bedrooms to reduce my current living expenses drastically and build MY net worth instead building someone else's by paying rent.

Property Info

-SFR 3 BR/2BA with detached 2 car garage and large yard

-1,309 sqft (6,100 sqft lot)

-Purchase Price: 400K with $0 @ ~3.5%

Improvements Planned (~$2500 is my estimate)

-Fresh paint on all interior walls (plan on doing this myself)

-Fresh paint on the inside of kitchen cabinets

-New flooring in the two rental bedrooms (undecided on what type and who will do work)

-Have tile and grout cleaned throughout house

-Minor work like securing slightly loose trim pieces

-Backyard clean up

Monthly Expense

PITI: ~$2,217

Utilities: ~$125

Vacancy: $100 (5%)

Repair/CapEx: $100 (5%) (big ticket items are fairly new and in great condition)

Total: $2,542

Estimated Monthly Income

Each Bedroom: $700 ($1400 total)

One garage parking spot: $25 (not including into final calculation as it is not a definite)

Total: $1400

Out of pocket: $1,152

I was paying $1,435 in rent so this would equate to reducing my monthly expenses by ~$300 ($3,600 yearly).

Exit Strategy

-Live in property for at least 2 years.

-Purchase another property using FHA loan and house hack again.

-Rent out first property as entire unit (no individual room rentals). Similar properties in the neighborhood are renting for around $2,300 at the moment. So considering rental increases and elimination of utility bill, property should break even or slightly cash flow. 

Conclusion

I fully acknowledge that a break even or slight cash flow scenario isn't the best or ideal. However, I am reducing my monthly expenses from it's current amount, building my equity, and getting my foot through the door into the REI world. I am not in a position yet (or comfortable) with purchasing a MFR for better cash flow because of the higher mortgage and management that would be needed (I want to avoid paying for a PM as much as possible at this stage). If worst case scenario the two bedrooms went vacant for a little, with my current W-2 income I am very comfortable with covering the full mortgage so there is little risk in that regard.

What is the BP community's honest opinion on my situation and what advice do you have for me going forward?

@Shaquille Turner Do you have enough capital to potentially use an FHA 203K loan? Your VA loan will always be available so it won't be going to waste if you go with an FHA 203K for your first property. If the numbers work, get a MFR, fix it up to rentable/livable condition, live in one unit for a year, purchase 2nd property with VA, rent out unit you are currently living in, and move into VA property for a year. Rinse and repeat!

That's the strategy I'm going for. I am starting with house hacking an SFR with my VA loan first though.

@Arthur Wang Welcome to the greatest community ever! That is a great goal to strive for and I'm sure with hard work and perseverance, you'll achieve it. Is there any specific neighborhoods in SD that you are interested in?

@Zac Conn First of all, thank you for your service. I separated from the Navy a little under a year ago. What is your rate? If you are Combat Systems related, I have a very good source for CS (gov't and private) related employment in Florida. 

As for the REI, have you considered, like @Rory Compton suggested, taking a few classes at a community college to collect the BAH? You can go to school "full time" and collect full BAH as long as one course is an "in class" one. This would allow you to take full advantage of the BAH and maybe even pocket a lot of it if you can find a place to live for cheap. 

I would also like to know why you want to go conventional vice VA loan.

@Account Closed and "Think and Grow Rich" by Napoleon Hill when an idea/question popped in my head. 

Can you or has anyone used a credit card cash advance to partake in a flip deal? For example, say you are able to take out 25k in a cash advance. You take the 25k to pitch in on a short term flip project being led by a reputable flipper (after doing your own due diligence of course) and get your 25k back plus profits when project is complete. If the flip only takes 2-3 months, you would probably pay a few hundred in interest but also get a nice profit. 

I don't intend on doing this at all but I'm just curious if anyone has and what their experience/result was.

@Ashley Benning @Jonathan Jaime Velarde There is a monthly REI meetup every 2nd Thursday at Mimi's Cafe in Thousand Oaks from 630-830pm. Next one is July 13th. Check it out! It's always a great time. Plus the food is good :p

@Jeremy Marrs and @Nick G., we should all get together! All newbs in the local area that can help each other out. Although I am most likely the newbiest (?) of you two as I am only now actively searching for my first property. 

@Patrick Liska Thanks for the insight. The place has been vacant for a few months and the yard work didn't seem like it would take much at all. I will be living there so I don't plan on hiring a landscaper. I'm a maintainer by trade so I get a satisfaction from....maintaining things lol and plus, I live in SoCal...ain't much to maintain if the grass ain't growing! 

I didn't even consider having an arborist check it out. I'll consider it. From what I saw though, the tree was looking very strong so I'm not too concerned with it. I guess I'm just thinking real far in the future and the potential damage. If a branch were to fall, there goes the garage and vehicles in it. I'll have to look into the home/vehicle insurance policies.

@James Peters Any update on your situation? This must be tough for you but the BP community is here to support you and give you advice! Hope all is working out.

 Yeah, no. Whole situation sounds sketchy. No contract was signed so you aren't binded to anything. Them purchasing plane tickets is none of your concern. Their application got approved, they didn't sign a lease. It's like having my job application approved. It doesn't mean the company is now obligated to provide me a wage. It's not official until both parties sign an agreement/contract.