Super beginner...what to do, what to do?

Question

Hello,

I have just moved home from overseas with my family of five. My husband is currently in the army and we are stationed at Fort Rucker, AL. Living in a hotel for now until we figure out what we're going to do. We have the VA loan available to us (we have a current rental in Colorado which has been renting out for the past four years).

Would you:

A) Buy a fixer upper and live in it while you fix it up for the next three years while stationed here and then rent it out?

B) Buy a nicer home to live in for the next three years and then ALSO invest in a fixer upper to either sell or rent out and then either rent or sell the nicer home once we move as well?

C) None of the above?

We have been listening to the BP podcasts and as he is retiring from the military soon we are excited about getting into investing (Mainly buying and renting out, we think for now). For the next three years at least he will have a very stable decent income and then a decent pension once we retire so as long as we know we can cover all the mortgages....

Christopher Blanco · Answer

Buy a 4 plex, live in one and rent out the other 3.

Arionna Barajas · Answer

Oh my gosh! Linda D., that sounds so fantastic. There is a four unit multifamily here that I am tempted with. I am just so unsure at this point of how to make a 'good deal' and when is too much risk? It already has multiple tenants in it. Your post got me excited. Lol. Thank you.

David Faulkner · Answer

Sounds like you are doing great ... now you can network with local investors and merge what they are telling you for your specific market with what others from BP in a different market (with a grain of salt) are telling you ...

Arionna Barajas · Answer

@David Faulkner, wow! Thank you so much for the detailed advice! I have been learning to manage personal finance during the last few years and feel like I have a somewhat decent handle on it.

As far as cash reserves go, I only have about $20,000 cash saved up and about $90,000 equity on my house that has been renting out for the past four years. I have $137,000 in debt on that house so maybe I'm not exactly sure how that puts me in terms of having a good handle on personal finance. Other than that, I have no debt.

I am so new at this. Grateful for all your advice.

David Faulkner · Answer

I'm not saying that a 4-plex wouldn't be a good option, but I'd approach it a bit differently:

• Make sure that you have mastered personal finance, how to control both income and expense, manage risks by positioning your balance sheet with cash reserves, etc., and therefore as a result have some money saved. Do NOT skip or shot change this step ... investing in RE is nothing more than analyzing and managing income and expenses and balance sheet risk, just done on a larger scale and with leverage; so better to master it first while the stakes are much lower.
• Educate yourself by reading and on BP, but keeping an open mind without trying to pick a market or strategy yet. Try to understand not just what folks are recommending, but why they are recommending it and the thought process/rationale behind it. Be wary of any advice that sounds like "this route is always the best way to go" without much explanation of the rationale ... they don't know you, they don't know your market, so how can they possibly suggest that a method that worked for them in their market would work for you in yours? Sounds like you may be on this step ... not sure if to what extent you've completed step 1.
• Network with local investors and see what they are doing and what is working and not working for them in their local market. Not every strategy or numbers will work in every market, so it is important to consult with local experts. This is a crucial step IMO that I see a lot of newbies make and try to skip to step 4 to apply advise they get online from a completely different market to apply to their own, when it may or may not be applicable or wise.
• Based on what the locals say is working, if any of those aspects appeal to you then formulate your own strategy accordingly. As a bonus, having done step 3 you now may have somebody with experience in your local market to bounce ideas off and they may even be willing to help execute your strategy.
• Execute your strategy. Revisit previous steps and make adjustments as needed as you go along.

Linda S. · Answer

@Arionna Barajas,

I'm envious, if you can do a fourplex, that already has tenants, on a VA loan... wow!  I'm jealous, seriously... that's such huge and easy cash flow!  I say go for it!  If you hate landlording, you can hire a property management company.   Just realize, you're buying 4 units, so it's 4 full kitchens, 4 water heaters, 4 bathrooms, etc.. so just be ready for stuff to go wrong, and have good $$ available, and you're good!   Good luck! :)

Linda S. · Answer

The best, and most correct answer to get you the most money-- get a multifamily house, preferably a triplex or a larger multifamily.   This will allow you to put minimal down, and instantly get multiple tenants, and will bring you the most wealth, the fastest route.

This doesn't factor in your quality of life, as you may want a large house, pool,  great neighborhood for the kids, etc...    so you have to do what's best for your family, and your lifestyle.. if you're after wealth, do the multifamily, but if you're after quality of life... determine what's best for your family, and if you can handle doing renovations.

Dan Krupa · Answer

@Arionna Barajas , no I did a SFR - three separate times. Knowing what I know now, I wish I had bought a multi-family instead of a SFR.

Arionna Barajas · Answer

@Dan Krupa, do you still have the four plex? Renting it out? I have seen one here for $147,500 in which three are rented out and the fourth is kinda crappy but not horrible. I'm interested.

Arionna Barajas · Answer

Thank you, @Bill S. That does sound reasonable. My teenagers prb could use some stability after traveling all over the world for the past three years.

Super beginner...what to do, what to do?

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