Newbie with a couple quick Qs

[Tony Pardini]

I'm in the military stationed overseas but will be headed back stateside in August. 

I've been doing a TON of reading about REI and I think it's the route I want to go while still working full-time. My plan is to use my VA Loan and get into a 4+ plex as an owner/occupant. After the first year I'll refi so I can expand on to another O/O property.

Are there benefits in using an FHA as opposed to a VA Loan for an O/O property? Seems like the potential for 0% down VA Loan is a huge advantage. Are there any other advantages I can utilize as a DoD employee to expedite my REI venture?

Also, I could easily swing a downpayment for another investment multi-fam property so that's also in the plans. Should I hold off and get my feet wet for a year with the O/O or if I find a deal should I jump on a second investment property? With any property I'll have to use a property manager due to working full time with the USAF

The upside of being located by a military base I'd think is the huge occupancy potental. Does anyone have any experience landlording around military bases?

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[Jeff Kushner]

@Tony Pardini Welcome back to the US! (come August…) Having spent a decent amount of time overseas myself both mil and civ, I can relate to the sacrifices made to live outside of the US while serving. For me, it was very frustrating to be accumulating so much knowledge yet not be stateside to apply it since owner/occupant is contingency of VA loan approval…

I've had the same idea to use my VA loan benefit to purchase a multi-family 3-4plex owner/occupant to get started investing. Once you find 20+% equity, whether from appreciation (speculative) or loan balance pay down, you can re-fi the equity as down payment on a conventional loan and then utilize the VA 0% down again on another property. When you crunch your numbers, be sure to consider the fact that if you 100% finance, your cash flows will be slightly less due to the slightly higher debt service, but obviously ROI should be strong because you have little to on money tied up in the property.

With interest rates under 4% for 30-year fixed, I'd try and tie up as large a loan as possible if the numbers work for cash flow in your area.  Talk to other investors in the area regarding cash flow vs appreciation; if your plan is to re-fi within a year and appreciation is less than or slower than anticipated or non-existent, that could put a damper on your plans.

If you've got enough cash to do conventional financing on a second deal, I personally would get leveraged up while interest rates are so low.  Others might disagree, but to each there own.  I think inflation is inevitable with the current US fiscal policy, but that's a whole 'nother topic…

Obviously, there will be a learning curve, but if you've got good cash reserves and steady income from DOD, working through unexpected issues shouldn't be to difficult if you've got a good team in place and play the numbers a little conservative on your first deal or two.

I can't offer any advice as to FHA vs VA, just crunch all the numbers for the different financing options against your desired ROI and funds available and it should be pretty obvious which way to go. I like the idea of investing in a military town, near a large established base. Just do your proper due diligence on researching rents of multi-family vs SFH vs purchase price and consider who in the military you might be renting to, especially if they are going to be your neighbors; you might find the returns/cashflow are better in areas that you don't necessarily want to be an owner/occupant for whatever reason, or that returns are highest with E1-E4 BAH when you want to be living with other E5+ and Os… That is all market/sub-market specific. Again, the numbers should tell you what to do. On the positive side, if you do end up with E1-E4 tenants that are active duty, you can inquire as to their chain-of-command to 'motivate' them to be good tenants or else their could be professional consequences...

 @Benjamin Timmins My understanding is that the VA is not itself a lender or a bank. You still secure financing through a regular bank/lender of mortgages, the VA only guarantees the 20% that you don't have to put down, so the risk to the bank is less. I think of it as the VA has the bank's back if you end up not living up to your obligations since you don't have any cash in the deal… (also saving you the PMI). The property must also meet more stringent appraisal standards for VA financing approval so that also helps to offset the bank's risk that the property won't back up the loan. I could be all wrong, but that's the way it's been explained to me. If anyone understands it differently or has a better way of explaining it, feel free to correct me.

Sorry for the long winded response… Best of luck and keep us posted here at BP as to how things end up working out!

-Jeff