What Would You Do in this Situation?

Question

I thought this may be an obvious, but interesting and useful topic to start. I have my own scenario that I am curious to see what you all would consider doing should you have found yourself in my shoes.

25 years old

Low income, labor for a GC

Veteran, access to VA loan

~$40K saved

720 credit score

Carry little to no debt (occasionally carry a 2-300 balance on my cc, that's it)

Can't think of other details to include, but this might serve as a good starting point.

Appreciate responses, and look forward to the discussions ahead.

Richard Jahnle · Answer

If I was in your shoes -

I would house hack using a VA loan, whether it is a small multifamily or a 3 or 4 bedroom house where you rent out the rooms. If you get something that needs some fixing up, you have the funds for some rehab work. This way you get experience buying a house, learning how financing a house works, experience rehabbing a house, and experience finding tenants and managing a property. If you enjoy the process, continue investing in real estate. If you don't enjoy the process, at least you now have some equity in a property with tenants helping to pay down your mortgage.

Kevin Branin · Answer

@Vincent Gurko I think you’re in a good position to do some house hacking in a multi-unit.  If you plan on doing the work yourself, which financially makes the most sense and practically since you have experience with your day job, you’ll be able to find something that needs upgrading, but is livable at the time of purchase.

Using a low down payment VA loan and saving your cash for the renovation is what I would do in your situation.  Then refi once your done to get a lower payment and maybe pull some of that cash back out.

I have done this myself with a triplex in Philadelphia and a low-down, FHA loan.  I live in one of the units, rent the other one out, and renovate the third.  So I still get help with the mortgage even while I’m renovating.  If you can find a Quad, you’ll be in an even better position to have one unit vacant while you renovate.

Let me know if you want to look for your first house hack in Philly.  I can help.

Craig Curelop · Answer

@Vincent Gurko - I don't think I am going to give you any ground breaking advice that you haven't received from the other wise people in this thread.

House hacking with the VA loan should 100% be your first step. From there, you can get into other types of REI if you so desire. Great that you're a GC, you'll likely be able to save at first in doing your own work and adding value.

Ryan D. · Answer

@Vincent Gurko I'm a vet myself, Philly area native and am in a similar situation except I purchased my first property for cash that I'm currently rehabbing to BRRRR for short-term rental. My question would be why are you working for a GC doing what I'm assuming is grunt work for $15-$20/hr when you have access to a VA loan and 40k saved? Do your own grunt work on your own property that you buy with virtually no money down and earn a much higher hourly $ rate via the equity you create in your own property. Either keep the GC grunt job while doing your own rehab outside of work or get the loan, use all the leverage the VA can give you then use the 40k savings to live off of while you rehab your property. You have the world at your feet thanks to the hard work you've put in to save that 40k and through your service. Take advantage of it brother!

Tyler Phalen · Answer

You’re in a great position! Depending on your family situation, but if you are single or if you can get your spouse on board I would look at house hacking. House hacking is just using loans designed for purchasing a primary residence in order to buy investment properties. This means you will need to live in it.

I would highly recommend using your VA and looking for a four-Plex. Four is the highest number of units that qualifies for this type of loan, but you can also look at 2 and 3-unit houses.

If you’re handy find one that is a bit of a fixer upper to get a better deal and use the 40k to fix it. Live in one unit and rent out the other three, if they need fixing then you can work on the one you’re living in and slowly work your way through each unit.

Once you’ve lived in it for the necessary amount of time required by the loan and you’ve saved up you can move on to another one. At that point you could REFI and use your VA again. You could pretty quickly build up a good portfolio.

, Tyler

Joe White · Answer

House hacking. Especially with the VA Loan power.

Brian Garlington · Answer

Buy a duplex with your va loan..........househack it by placing a renter on the other side..........

Troy Sheets · Answer

Hi Vincent,

A house hack quad using an FHA loan was my first investment here in Philadelphia and it was an amazing one. I can't recommend it highly enough and, if you can use a VA loan instead of FHA, all the better. Let me know if you want to grab coffee one day soon and chat. Happy to help you navigate this a bit.

Troy

Tyler Phalen · Answer

That’s great! Wasn’t sure what GC was when I first wrote, but after reading further I’m assuming general contractor. So, you definitely know how to fix up houses, you should find a fixer upper and build some sweat equity into it!

The VA is like any other loan designed for purchasing your primary residence. So you can buy SFH all the way up to a quad Plex. Except you aren’t required to provide a down payment and the APR may be a bit better. I don’t know all the ins and outs of it though and I would highly recommend Finding a really good mortgage broker who isn’t going to charge you a bunch of crazy fees. Ask around and maybe try to find one that is a vet or gives good deals to vets.

Good luck and good work,

, Tyler

Vincent Gurko · Answer

Appreciate your response Kevin. I am very interested in speaking more about your own multi-unit property you are doing this with - I think I need to iron out a few details before I jump in, but this is sounding like the route I want to go.

I am looking primarily in Philadelphia suburb areas, not exactly in the city - I don't think I could swing living off my savings and using it to rehab at the same time, so I need to maintain at least part time work to cover my bills.

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