All Forum Posts by: Frankie Woods

@Kanna Nandakumar , welcome to BP!  Looking forward to hearing more from you!

@Ronald Perich Thanks for reading!  You'll see a lot of people saying you should just jump in to avoid "Analysis paralysis".But I think this should be framed or caveated with the importance of education, which a lot of folks on the forum do.

In my opinion, you’re approach is excellent.You’ve created a game plan (thru your business plan) and outlined a timeline.Now you have specific criteria which will prevent sensory overload and limit the effects of the “next shiny object”.In addition, your timeline should ensure that you don’t sit on the sideline indefinitely.

You’re well on your way!I wish you well, and I hope you share your story as you progress!

@Olivier LePage , bonjour!  Welcome to BP!

3) Round three of the master plan!

Welcome back to the third installment cataloging my burgeoning real estate investing “career”.Actually, up until now, I really viewed these experiences in My First Couple of Blog Posts more like a hobby.In hindsight, I should have spent much more time learning each individual market BEFORE finding and purchasing each property.Ah, to live and learn!C’est le vie!

I arrived at my new duty station in the summer of 2012.Scott AFB is nestled in a relatively small community about 30 minutes east of St. Louis.It’s actually a pretty sweet deal: close military family who take pride in executing the mission while looking out for each other; relatively close to several major cities (St Louis, Chicago, Nashville, Memphis), but far enough away to avoid the hustle and bustle; easy access to many outdoor activities; growing tech industry, close to five excellent transportation routes (the Missouri and Mississippi Rivers, and I-70, I-64, I-55); and an exciting baseball team (I’ve drank the Kool-aide and am now a solid Cardinals fan).Talk about Location!

I started out wanting to live in the city.As a single dude with no kids, who wouldn’t!?!?However, the more I looked, the more I realized that most of the properties were 1) old (average age of about 90 years); 2) too expensive for my “needs”; 3) needed a lot of work, or 4) in war zones.Add that to the fact that the commute would get really old really quick.Yeah, no thanks.

Therefore, I decided to buy new construction.New construction?Why on earth would an investor EVER buy new construction you ask?I’m sure there are indeed situations were it makes sense.This was not one of them.Ah, the trials and tribulations of not having BP…

I ended up purchasing a 4 bed, 2.5 bath SFR with one of the bedrooms converted to a loft-like open room concept.It looked awesome!Hardwood floors throughout the first floor (good), great kitchen (good), big rooms (good), for $183,000 (bad!).To top it off, the community had a pool for just $45/month in HOAs.Rents in the area were going for about $1,500/month for 4 bedrooms and $1,200/month for 3 bedrooms (at this point, I actually had the prudence to look at rents in the area -good).

Through several conversations with several lenders (good), I found out that I could actually have multiple VAs at one time, up to a limit of about ~$417k.The loan in Lancaster was for $195k, so I still had ~$200k left.Awesome!Rents would cover my PITI and I would have to put virtually no money down! Score! Wait, not so fast….

Those pesky additional expenses that you have to account for: vacancies, maintenance, and capital expenditures.Dang it!

The verdict is still out on this purchase.I still have about two more years remaining at this duty location.I haven’t yet hacked my house by taking on roommates (though I may need to seriously consider this option for the remaining time here).Hopefully, I can get closer to the average rent for 4 bedrooms at $1500/month.That will put me at about break even as far as cash flow (actually losing about $75/month).If I get the 3 bedroom rate of ~1200/month…well…not looking so good. BP! Where were you?!?

Well now I do.And now I think I’m quite dangerous.As you’ve seen, I’ve made, repeatedly, some pretty bad rookie mistakes.Nothing to break the bank, but bad nonetheless.It’s good to say that I’ve been learning along the way, and BP has really brought those mistakes to the forefront of my mind.Though I’m sure I will continue to make mistakes as I grow, I’m sure we all do, I truly believe I will get more of the things right going forward.

In the next installment I’ll talk about my latest deal, which in fact, is a pretty good deal if I must say so!It’s a 4plex in St. Louis.I can’t wait to get into that and hopefully hear what some of you have to say.

I would love to hear feedback if you have it.Go ahead, leave a comment.I won’t bite.

@Paul S. 

Welcome to BP!  I found myself in a similar situation as you have.  As a military member, I was making what I thought were real estate "deals" by buying primary residences and renting them out when I moved.  I mean, I thought I was a pretty darn smart guy!  Turns out, after spending a few hours on BP, I was very mistaken.  I'm thankful for what I've gained my being a member and hope to take it to another level!  Best of luck and hope to your more of your story as you go forward!

@Chance Cooper thanks for taking the time to read the post!  I was in Afghanistan (Bagram) in '12.  I'm now at Al Udeid...it is soooo much better, haha!

There is nothing wrong with paying off your homes.  In fact, that is a pretty contentious item in this community.  I say, do whatever makes you comfortable.  Security is a GOOD thing.  Though you can get better returns using leverage, you can also get a lot burned a lot more if things turn sideways or upside down.  I may actually use a combination: pay of some homes with some of the cash flow while I continue to leverage others.

I think that strategy would be ace!  I am actually thinking about doing something similar.  you know the area so you have that covered.  What I would do is find a place to buy FIRST, and then move.  That way you get a GREAT deal before uprooting yourself.  Just be mindful of the moving costs (which are really pretty insignificant in the grand scheme of things).  

Looking forward to hearing more about your story!

@Jady Guidry I've used it twice. You can have multiple VAs up to about $417k (which I do). It is a very easy process with the only caveat, as you mentioned, that you use the property as your primary residence for at least a year. I would highly recommend it. It's probably the best financing deal in real estate next to owner financing and the FHA loan.

Zero cash flow isn't necessarily bad, but you probably can find better!  I would look for something that needs a little TLC, but nothing major.

@Jady Guidry I used my VA on my second primary residence, and it is definitely one of the best ways to get into real estate. This deal is definitely better than the first one I got under my belt.

The good: as @Gabriela Gomez metnioned, this automatically becomes a good deal when compared against renting handsdown.  Only having to pay 400/month leaves plenty of room to increase savings, invest in other areas, etc.  Also, given the price of the property, I'm assuming this is a Class A property in a Class A neighborhood?  Though I wouldn't count on appreciation in determining whether or not to buy, you probably have a pretty good chance of having it in the future.

The bad: You actually will not have $400/month in cash flow after you account for vacancies (generally 7-12% of rents), mx reserve (generally 10% of rents), and capital expenditures (generally 5% to cover large items like roofs/foundation/sewer/etc.).  That alone brings you down to $0/cashflow. 

Now, I personally don't think $0 cashflow is bad, especially given you will only put about $5k down on this property after all fees at closing.  You essentially get a (almost) free place to live until you move, and then have tenets pay down your principle, giving you a pretty good sized piggy bank over time.  However, most true investors wouldn't take this goal.

It all comes down to your goals.  Again, I made a similar purchase awhile back, and I don't regret it.  Hope this helps!

@Wendell De Guzman  awesome!  That's my new goal! Gears are turning!

@Sara Cunningham I hope to be where you are at in the future!  It's good to see other military folk taking advantage of the benefits we have.  I think many of us don't realize how good we have it.

I had no idea OKC was such a good market!  I think we are lucky because a lot of the military insititutions we get "stuck" at are in pretty good locations/cities.  It makes opportunities ripe for us buy and holders!

Slowly working on building the portfolio and continuing to learn on the way.  A definitely agree with you; sometime the best way to not only learn, but institute those lessons in our daily decisions, is by making the mistakes firsthand.  It really sinks in when that happens, haha!  Thanks for sharing and I wish you the best as you continue forward!