First Property, Own? Rent out? Flip?

Question

Hey BP,

So I'm pre-approved from my bank and I'm actively seeking a property in the Tacoma area (checking out abandoned off the market homes too). I have a full time job that is Sunday night thru Wednesday night.... Should I be looking into purchasing a home for myself and rent out a room (I can utilize my VA loan), Completely rent out in a college town or a flip (I would have to get hard money....and take a lot of days off)?

I'm stuck mainly between renting completely out and flipping... I could use (if profitable of course) flipping to use as a down payment or just rent out near a University and have parents co-sign, etc etc...

Thank you!

Alex Chin · Answer

Generally speaking, I believe more can go wrong for a newbie on a flip. If you are not experienced in the contracting industry, I believe you should stick with your plan of buying a home, and renting out rooms or units in the property.

Build equity, get hands-on experience, start really learning the business, and get a bit of a sense for how to interact with contractors as you do minor repairs.

Plus this way, you keep you W-2 income and the banks love it when you can show steady, consistent salary.

Joshua Martin · Answer

Hey Cody,

Cool to see another newbie with a similar plan (or lack of a plan ;)

I've been going back and forth and still just reading and learning and reading some more about what avenues to go, but Brandon Turner makes a compelling case for why a multi-family should be your first investment, and I think I'm he's convinced me. Check this out if you haven't already: https://www.biggerpockets.com/renewsblog/2013/11/0...

The multifamily seems compelling because, first of all, if I find a cash-flowing property (even marginally), I can get paid to live there where building up equity in the house, and two, I can continue saving money like a mad man for down payments on whatever other investments I'd like to make.

I've also been looking at foreclosures and 'board-ups,' but as I think through it, they might be too much for rookies, even someone with the willingness to put in the 'sweat equity.' First off, in my area, abandoned homes are in rough parts of the city, and while buying them for next to nothing seems appealing, I bet there is a long list of head aches in dealing with these types of properties; some need extensive work, and after you've put that in, say a roof, interior and exterior paint or repaired siding, broken or non functional windows, etc, etc, etc, will you ever get it back? Basically, being the novice that I am and the current difficulty of estimating repair costs I'm going to stay away from that at the moment. At least until I read both of J. Scott's books.

Anyhow, I don't want this to get too much longer. Best of luck.

JTM

Gerald Harris · Answer

@Cody Bernardy

Looks like you have some options.

You could find a 3 unit of 4 unit.   Live in 1 rent out the other 3.   You achieve cash flow.

Her is an Article that talks about VA financing

https://www.veteransunited.com/futurehomeowners/ho...

Michael Lee · Answer

Hello and welcome to BP!  It really depends on what your goals are.  Do you want short term or long term?  Buy and Hold seems to go along with Fix and Flip pretty well.  Do whatever you like.  Do not try to do everything yourself.  Find experienced and trustworthy people for your Team members and know that they will return your phone calls.  Provide insurance immediately after you close to protect your investment.  Attornies, real estate Agents, CPA's, General Contractors, and Inspectors, etc. are just a few of the most important Team members.  Make sure they are local.  Change the exterior door locks to your units ASAP and if the locks are still good just use them at another address.  Always do the numbers and try to look at everything before you make an offer.  Tell the seller why you bid lower than their asking price and make sure they understand your decision.

I am 59 years old and I have found BP about 7 months ago and I am still trying to decide what to do.  I went to college and I got a business degree that emphasized real estate.  In that same year, in 1980, I got a broker license.  I did a few deals for other people.  Regardless of what I had I felt more comfortable in the construction business.  I have been in the construction industry since I was 17.  My father has been in real estate for about 40 years and he has taught me a little bit.  If you think that I can help you please contact me through BP at any time.  Good luck!

Greg Cooksey · Answer

Has your bank told you which conditions they will loan on a property? I'm sure you know that the VA loan has some restrictions, so you will have to live at the property for at least a year (in at least one unit if it's a duplex, triplex etc...). They may also not finance a full flip if it needs a lot of work - especially structural work - and the LTV is too high. It all can depend, so just make sure that your financing lines up with what you want to do so there are no surprises.

I am trying to do something similar right now for my first investment is to buy a rental property (probably with my VA loan) and "house hack" it. I am looking at properties that are not move in ready so I can try to get a lower offer accepted and get the money for the rehab included in my loan. Live in one of the 4 units for a year and then move out and refinance.

I would highly recommend coming to the next local BP meet up in Lakewood - should be sometime later this month. There are a lot experienced people there to talk with and network.

First Property, Own? Rent out? Flip?

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