Active duty military moving in 1.5yrs. Should I buy now or wait?

Question

It is February 2019 and I am deploying in July for six months. I will then be moving to a new base in May of 2020.

So I have 6 months in South Carolina (where I am looking to buy), then deploy for 6 months, then come back for 6 months and then move.

I want to house-hack and rent it out when I move, but I am stuck. Being a new, younger investor, should I:

1) buy now before I deploy?

2) buy after my deployment (having saved up for a large down payment)?

3) buy once I move to a new location so I have more time and stability in that house?

Looking at a multi-family or SFH. I plan to use VA or conventional loan.

Thanks a lot!

- Josh

Mike St. Jean · Answer

Josh,

Im by no means an expert on this but I'm a military guy like yourself so if I were in your situation, this is a way you might be able to proceed.

You fortunately know your schedule which helps a bunch.

Definitely use the VA loan so you don't have to worry about a huge down payment, you'll need money to close including the VA funding fee. 5-10k ish. start shopping for a lender.

IF you don't mind living in a duplex, you could find one that makes sense numbers wise and get that in your current location. Rent out the other unit while you are there. If you are feeling really froggy, maybe short term rent your side while you are gone.

When you move, rent out your side of the duplex, now you have two units. At your new location get another VA loan (if you are below the cap( $484,350) and start over again. Either get another multifamily or a SFH if you need a forever house.

Hopefully this helps! Again I'm a newb, if anyone has anything different feel free to correct me.

TL:DR:  Buy now, rent during, buy after moving too.

Scott Williams · Answer

I don't think the deployment should affect if you buy now or not.  The deal should be your principle guideline.  If you find the deal now, jump on it and find a good property manager locally while you deploy.  I would recommend a multi-family and utilizing the VA loan.  Then once you move, buy another multi-family at the next duty station with the VA loan again (yes you can if you didn't max out the entitlement).  Use the extra money you save on deployment for either reserves or funding the next deal.

Patricia Steiner · Answer

First and foremost, thank you for your service.  Here's what I recommend:

1.  Timing is one thing - but finding the right property at the right valuation at the right location should be the driver.  You'll also want to make sure that the roof and AC have plenty of life remaining - 3 to 5 years is required to be insurance eligible but I would recommend 5+ years.

2.  Rental Market and Tenant Selection.  Before you buy, you'll want to know what rent that specific market is commanding. Also, who is your target tenant?  If it's military, how might an unexpected deployment and termination of your lease impact you - especially if it occurs during your deployment?  What support will you have for tenant issues during your deployment? (Property Management fees would need to be part of your analysis).

3.  A house may not be the right property choice due to the maintenance required.  Lawn care would need to be included in the rent and with being deployed for six months, you would also need to have a handyman/contractor/service providers in your arsenal for repairs required while you're gone.  A townhouse with a low HOA that would cover the exterior - including the roof and insurance - might be a better fit.

4.  Definitely use VA financing.  You earned it.

5.  You'll want to get a solid rental contract prepared that requires the tenant to carry renters' insurance with "landlord additionally covered."

6.  Since you'll be purchasing the property in your name to use your VA financing benefits for primary residence, be sure you have plenty of liability insurance coverage once it is used as a rental.

Owning a profitable rental property requires that you purchase it right, limit expenses, and maximize rental income.  You'll want to crunch the numbers and see if it's worth doing now or waiting until the economy "adjusts" in 2020 as expected for a potentially better buy.  There are many other factors to consider and plan - and other forum members will surely be great resources.

Hope this helps...

Josh Edelman · Answer

@shaun

@Shaun Futch thank you very much! this helps a lot. I have decided (after studying a bit more and from the pre deployment readiness) that I will not do a fixer upper; however I a most likely start with a VA for my situation and overall recommendations. I will make sure that I will still be able to use it at my next location though. I am looking for deals now and running the numbers to make sure I get a good ROI.

any other recommendations along the way I appreciate. thanks again all!

Shaun Futch · Answer

Josh you and I have talked on the private chat but I am going to place it here for all to read and then I will dive into answering some of your further concerns as I have been in this situation multiple times and have a pretty good blue print to it.

Step 1: don't use your VA yet. Use your FHA first time home buyer mortgage to buy and move into a multi-family property (2-4 Plex).  This will give you the benefit of immediate rental income while living there it also saves your VA mortgage for your next PCS.  (If you are deploying soon do not get a fixer upper as the preparation for deployment and trying to get this house rent-ready will have you in a bad situation) (I say use the FHA first because if you use the VA first you can't use the FHA next. But it does work if you use the FHA first)

Step 2: rent your portion of the property out while deployed (I especially like the Air BandB idea that was mentioned as Charleston works for that concept anyway).  I have always rented my properties out during deployments, putting your stuff in a storage facility with BAH and rent rolling in is a smarter option.

Step 3: when you return home, you can choose to move back into your property or buy that fixer upper you have been dreaming of depending on how much longer you have before your next PCS.

With Air BandB I am not sure how justifiable it is to claim you are not moving back into your old home.  But with a traditional lease and tenets in your property you can easily justify to the FHA and VA powers-that-be on why you are not currently moving back into your home after a deployment due to a tenet having a lease with the property.  I have always used this opportunity to get another property (usually aiming for the fixer upper as post deployment money helps with the renovation too.)

Step 4: PCS using your VA for the first time and once again getting a multi-family property.

Step 5: while living at new Duty Station you are now able to collect more fixer uppers.

Step 6: PCS or deploy again and use your VA for a second time if you have entitlement left.

Bonus Step:  VA foreclosures sometimes offer their own VA entitlement so you can have even more VA mortgages after you have used your because VA will front the bill of financing their own foreclosures.

Following these steps, you will have at least 6 houses in the next 4-5 years with almost no money down.

A lot of people are giving the good advice to “not rush to purchase” but the actuality I would say is “do not rush to a bad deal” defiantly still purchase a property before you deploy just make sure the numbers work.  Also, regarding my advice of not buying a fixer upper before deployment with the concept of rushing to failure you have to factor in that a normal home purchase takes 60 days and a fixer upper using the 203K is often closer to 90 days due to inspections and contractor quotes.  This would give you at most 2 months to fix the house on top of all of your pre-deployment requirements.

Josh Edelman · Answer

Thank you everyone. After studying a bit more of my area and the potential I am 100% committed. my biggest question is VA loan or FHA? I hear differing opinions on this part. I would like to do some repairs on whatever I buy. Will VA loan allow this (ie buy a property for 50k, put another 40k into work, buy equipment/furniture for 20k = 110k total).

In about 1 year I will be moving and buying another property. Some say do FHA now then do VA loan on second property.

Others say you can do VA loan on both.

Adam L. · Answer

Hey, @Josh Edelman! My partners and I run a company called Active Duty Passive Income and we love having conversations like this. Let me start by saying, it is always a good time to buy an investment property! Notice I said investment property and not home. I am sure you get that and that is why you are here but I want start by saying that.

Many of the comments on here were spot on in so much that you should focus on making sure you are buying the RIGHT property and not just buying to buy. We wrote an Amazon best selling book called Military House Hacking so I think you can probably assume I am for the house hacking side of this. I say you use your VA loan to find a nice multi-plex property and rent out the units you are not living in. When you are deployed, take down ALLLL of the personal items in your house (or just never really put much up) and Air B&B your side while you are gone. You can control when the house is available and you can hire a property manager who specialized in this while you are gone. You can REALLY make some good money on a 6 month deployment (ask @Mike Foster).

After you PCS, do this AGAIN AND AGAIN until you get out and never ever sell these babies. Keep the passive income coming in and enjoy life.

Then when you are ready to buy apartments (you are now, you just may not know it yet) then come talk to me about that as well! Good luck and stay safe out there!

Andrew R. Lucas · Answer

@Josh Edelman Don't rush the purchase!  If you don't find a property that works for your numbers before you deploy, then wait.  However, I do not believe you should hold off purchasing because of deployment or moving.  Life will always be there and there is never a "perfect" time to buy.  So make the move if the deal shows up.  If not, save that duty pay for the purchase when you return.

THANK YOU for your Service!

Josh Edelman · Answer

okay thank you all!

Cole Strange · Answer

Hey Josh - I’m a mortgage loan officer and also a veteran. I specialize in VA loans and happy to give you advice on this. I bought my house with my VA loan a little over a year ago.

Active duty military moving in 1.5yrs. Should I buy now or wait?

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