All Forum Posts by: Jason Minnich

https://www.google.com/url?sa=t&source=web&cd=6&ved=0CFUQFjAF&url=http%3A%2F%2Fportal.hud.gov%2Fhuddoc%2F26-7c3VALH.pdf&ei=iY8IUo3vKcmPrAGuxoG4Aw&usg=AFQjCNGGkVUUMqtK7kKJ5kTNmKmWcOlLPA&sig2=h8GucDPBVEkTSbRTjVfwTQ

Bad news, so without refinancing, when you signed the loan documents you certified you would occupy the home upon closing within 60 days unless you got an extension. By that explanationation ation in the link it appears it's actually the law and not a mortgage issue. Obviously if you really want to fight it contact the local VA office but until you have a move date for a PCS, you need to follow your commitment and move into the new place.

As I've implied above, you don't have to move all your stuff to live there but I would imagine it's not worth keeping your other place for a year as storage. As someone else mentioned you could rent out rooms assuming you were living in one yourself. The VA loan is a great benefit to military but it does come with restrictions and unlike many loan terms they aren't just mortgage terms, but actual law which is why you need to know what you are getting into before you sign on the line, and ignorance of the law isn't an excuse to break it.

There is however nothing keeping you from listing the property, after you move in, if that is what you want to do, but know that many lenders won't let you originate more than one loan for a primary residence in a year. If you PCS you can originate more than one because you were forced to move by the military but other than that many lenders have that buffer period to prevent you from gettingresidency based terms and then flipping the house immediately upon closing, which you should use an investment loan on.

First, I wouldn't bet on "wind of pcs" orders unless you are confident in the move. Next occupancy is a pretty set requirement for the VA, orders are one of the only reasons I know of where you can get out of minimum residency. I would move the bare minimums to the new house and live there until you are firm on the pcs list and the assignment wouldn't fall through, aka orders in hand. Only then would I relist the property because you need the orders to get out of the minimum residency. I'll do some checking but don't have much good news for you.

Good luck!

Jason

When he goes to basic that officially starts his active duty commitment and he can legally break the lease, see here for your source - http://usmilitary.about.com/cs/sscra/a/scra2.htm. You have some recourse if the people he is living with are not his legal dependants and are on the lease but since he is doing it to get health benefits that is almost surely not the case. What this means is while it is great he is trying to fill the vacancy he doesn't have to and as long as he fulfils all his other lease terms you must honor the lease just as if it were expiring due to time. My advice, try to fill the spot but don't hold him to it because if someone finds out you played chicken with federal guidelines that's a bad day for you. Yes it sucks, but you have to realize that he is sacrificing a lot to go into the military and that is why these relief acts are in place. Good luck filling your vacancy.

Javier Molina,
When they ask for best and final that's just what they are asking for, so give them your final, if it was no more than your first, that's what it is. Unless I'm mistaken, selling agents are not allowed to discuss other offers, I was actually under the impression that it's against the law, but I'm not entirely sure, consult a licensed Realtor.

Next your questions - background and credit checks would be done by the management company that would place a tenant. If you want there are services online that would check those things as well. I think I was offered a service like a landlord insurance from my former property manager but I never really looked into it to determine costs, and I imagine that it requires you to use a property manager. And looking at the status of the houses can be made much easier by meeting and building relationships with your neighbors, so you don't have to pay someone to give you a heads up something is wrong. Build a relationship with your future tenant as well so they feel comfortable sending you pictures if there are problems or sending a message on your tenants portal (keep that paper trail when dealing with tenants). Every little bit helps :)

As for your concerns on carpets and walls, part of that is why you collect a sufficient security deposit. Along with that you could self insure by saving a portion of your rent per month so you can adequately cover major expenses, but I would suggest you consider more important major expenses than carpet and walls, those are minor compared to HVAC and roofs, and while 2007 is relatively new, a water heater's typical warranty lasts 3-6 years for builders models and if that goes out you could end up flooding something badly. Anyway, don't mean to discourage, but just trying to help you understand all the joys of homeownership and eventual landlording.

I am doing it now in my Cali property in fact. Many property management companies will offer tenant placement as a one time fee and then offer a full management service for around 10% plus a placement fee. The one time placement costs more (3/4 vs 1/2 months rent) but if they can place well it may be worth it. You can also market on AHRN, Zillow, craigslist, and many other online places yourself. I use an online company to manage billing and tenant correspondence and it works all right, there are many companies and software solutions out there to help with that.

Finally you have one thing many investors don't inthe house, time living in it. For example, my CA property, the outdoor outlets are run from the main bathroom. Don't ask me why this was but I learned early on that when the power dies, check the bathroom. Sure enough my tenant called that in as a problem and I was able to walk him through the solution. Some times you can't win. My heat went out while I had a property manager, they called the home warranty, but didn't follow up and it was more than 10 days before it got fixed. So the management company fell down by not overseeing the repair and the warranty company failed by not overseeing their contractor.

Home warranties can help if your house is older and you are unsure about your appliances but make sure to shop around. I ended up firing my management company because of this and micromanaged the warranty company but will be replacing them too. Bottom line if you think you can manage it, and you know how to find good contractors when you are living there for when things break on your tenant there is no reason not to pay someone 10% to collect a paycheck.

Javier Molina, Just a thought, in order to bring down your principle a bit and have the possibility to refi into a conventional when you leave, instead of paying your mortgage while you are living there (assuming VA), consider paying what you would charge a tenant to live there, with the extra going to principle. This would serve to lower your monthly payments when you are in the house and allow you to target a higher cap because that added principle is effectively part of your down payment now. Take all advice with a grain of salt, and make sure you understand that most investors are not military investors. Also if you target AHRN or military only for your tenants when you leave, its possible you might be able to forgo having a property manager because you know there are other methods of retrieving your rent if an issue comes up (it's almost sad how easy it is to garnish federal wages). Just things to think about and different ways to get yourself into the REI mindset as inexpensively as possible.

Javier Molina, Good luck with your investing. If you want to go into the SFH market here's what I would recommend, find a house that you would want to live in for 3-4 years, if you can fix places up, find a fixer-upper and make it the place you want to rent out. You can also work directly with flippers and try to get a direct line into a place, saves them finding a buyer and allows you to help work on the property in the process.

As for CPA's, their rates vary and typically depend on how complicated of a tax situation you are in. If you are planning on maintaining CA residency (a questionable practice), you might be able to do your taxes on your own. If your personal tax situation isn't too complicated, and you are decent at researching your tax needs, you don't need to pay someone 60-200/hour to fill out your 1040s. My military job is as an analyst, so I like detail oriented things, so I figured out what I need to do regarding my taxes and will just continue to use Turbo tax until my situation changes again. The down side of this approach is if I'm ever audited, I need to deal with my own situation, whereas with a CPA they have their records and can typically answer the mail much quicker and potentially less costly than you can (or hiring a tax attorney). Bottom line is you are the only one that can know the complexity of your tax situation, REI gets complex, but since you will be moving often, its very possible you would eventually have to hire a very expensive CPA or several local CPAs just to file all of your state taxes appropriately.

Any other questions let us know, you have a great community here, I said something ("you don't need a CPA") that many people will disagree with, but everyone's situation is unique, so do what you think is right for your situation.

Good luck!

@Everyone, I apologize in advance because this is going to be long (though not as long as normal because I can cite my own rants now).

First and foremost, as a fellow military member, Javier Molina, Thank you for your service and good luck with your Real Estate investment prospects.

Next in addressing Simon Campbell, Your info regarding multiple VA loans is not entirely accurate. I explained the possible situation where you can use multiple pulls of a single VA eligibility without paying off your open VA loans - http://www.biggerpockets.com/forums/12/topics/86709-help-analysis-paralysis

It's the last post in that thread. I think there is information there that might help Javier as well.

Next some advice, Javier, it sounds like you have an idea of what you want, but you aren't sure how to execute. If you want to live in a place and then rent it out do that. If you are planning on trying to do this for a living, you want to make sure you get the best deals out there. It's important to know early on if you want to go into multifamily properties or single family homes. While it is true that you can get more rent (typically) for multifamily units, you run into issues with financing, as well as several other potential local problems. For example, here in Ohio, I have a friend who owns a duplex, they were trying to do simple renovations and run a new drain pipe but the city they are in requires anything greater than a SFH be considered a commercial property and requires commercial contractors. So they literally had to hire a guy for $500 to supervise their contractor to do the work because all the commercial contractors come at a commercial price point. So that's just one potential issue you might end up with.

You can look back at past posts (including the linked one) and see that my goal is to buy where I'm stationed at "if it makes sense". It sounds like you have a good justification for buying there but I really like to have my houses not be completely reliant on the military for their income. If there is defense industry or other major job sources that makes me feel more comfortable in my decision making process.

Brian Mathews, I know know what your background is, but if you don't have military experience I would highly recommend not giving advice regarding military specific issues. For example, I have found very few locations where it was actually a good deal to live on base. Most bases, privatized or otherwise, set the rent to be all your BAH and then you have to pay a reduced utilities rate. BAH is typically 70% of the local markets rental value (depending on where you are) so it could easily cover a house off base and all utilities, and it typically can cover most mortgage payments assuming you are buying at your income level. Furthermore, living on base housing doesn't gain you a better house. My last base they were in the process of condemning the base housing because they were that old and fallen apart. AND I had a buddy that was living in housing, they held his security deposit when he left because they said his carpets were not clean enough. They were demolishing the building! And when you sign a contract with most government housing you lose or severely reduce your right to recover your money via the court system because the way the system is set up.

Everybody values their risk decision individually. This includes the long distance land lording risk and the property being vacant. You have a great positive going for you in if you go VA you will be owner occupied for at least a short period of time. What this means is you can meet the neighbors, grow a relationship and build a network of people you can trust to oversee your property while you are gone. I have contact info for 3 different people around my California property, and I'm building that relationship with a few people here, we have a nice church leader that is a neighbor who is very happy I've been keeping up the house because she grew up in it 30 years ago. You don't get that kind of interaction during typical investments but its nice knowing people who care are around.

And finally, I have to mention your potential tax liability. California, in their infinite wisdom, has decided to impose a 7% franchise tax board tax on rental income going to out of state investors that use a property management company. This is in an effort to ensure they can collect as much as possible without dealing with silly things like deductions etc. There are plenty of forms to fill out in order to get a reduced or waived withholding, but rather than just filing your taxes minus depreciation/expenses at the end of the year, you would get hit quarterly unless you self manage. If you self manage, you don't have to follow that route, but make sure you know the tax issues. Because you are moving around a lot, it would probably benefit you to hire a CPA in every state you have a property to manage or get real smart on tax codes otherwise you could get a nasty surprise since most CPAs wouldn't think to look into this sort of thing. If you think about it, the way they implemented the tax it's brilliant. They tax you through a Property management company, and only out of state investors. That means your local CPA won't know what the right code is and most California CPA's wouldn't know it because it only affects out of state investors and. Enough about that, but just make sure you know what you are doing before you get into it.

Thanks again for your service and sorry again for the long reply.

Sincerely,
Jason Minnich

Joel Owens, I'm not certain about Robert Setliff's goals and plans but it doesn't sound like he's looking at doing very large multiplexes, but rather maybe SFH or a duplex at best (and I could be mistaken). That being said, if he were hitting the SFH or even the duplex market, most of his eventual buyers for an exit strategy would not necessarily be other investors, but possibly families. At that point, I would typically say don't factor in PM costs into your calculation unless you plan on specifically selling to an investor and it will continue to be an investment property. At that level, I (property owner) don't care what a new owners plans for a property are, just that it made me money, unless it is a multi-unit that will always be a rental property.

Further you certainly want to look into your Taxes, where I was in California, I found out after I fired my old PM company, but if you have a PM and you are an out of state investor, the CA franchise tax board collects an additional 7% through your PM company, and it sounds like getting that back can be difficult. So it might not be the case in your area but if you are planning on moving with the Army any time soon, its something to be aware of, and make sure you talk to a local tax professional because even the local PM's didn't know what to do as far as that tax was concerned it wasn't until I spoke directly to the FTB that I got an answer.

Ryan Guina & David Krulac, I'm doing just that. Not every duty station, but thus far I have a place in CA and now in OH. I'm highly considering NM but I am not sold on that market yet. My goal is to have a rental property in each place it makes sense to, build the cashflow and with that also build equity that I can then use for more or better places down the line. I'm even doing long distance landlording on the CA property, its not ideal, but several factors, (poor PM company and CA Franchise Tax Board not withstanding) contributed to that decision and now I feel more confident in my skills when I go to convert this Ohio property.

Bottom line, you can do it in the military just fine, you just need to work hard, oh and since this is passive income you don't need commanders approval for this as your second "job" which could help if your commander wouldn't otherwise let you work outside the military.