Real Estate Reality Check

[Riley Breck]

I am in kind of a pickle with my current situation when in comes to REI. My current plan is to purchase a multi-unit property in Key West, Fl (Current market prices are 625k+ for viable choices in the area) and house hack the property. With my current assets and income does it make any sense to take on that size of a mortgage (0% Down VA loan)/fees ect. from a risk perspective? I am very fiscally responsible, but this is my first real estate investment and I don't know if I am over my head. I've done quite a bit of research on the area and the rent estimates look quite promising, but maybe their are numbers I am overlooking and it's unfeasible. As as example one of the houses I am looking at closely is listed at 650k 4/2 with a second unit that is 1/1 (I would live in the 1/1), recently updated and doesn't appear to need much work done to it.

Current Assets - Approx. 65k Cash / 15k in IRA

Income (Including Housing Allowance - 2.3k) - Approx. 70k 

Estimated Single family Home cost = 350-500k (Current housing Market makes it impossible to find a viable house under that price in Key West, Fl

Estimated Duplex cost - Approx. 625k+ (Not including agent fees, closing cost ect.)

Rent Estimates - 1 Bed (2.1k) 2 Bed (2.8k) Both Conservative Averages as of 4/2020

As active duty Military my second choice would be to return home to a much more moderate housing market, utilize housing allowance (1.5k/month) and utilize the same strategy. 

[Mark H. Porter]

Riley, I used my VA for my first rental, a 3-unit. I lived in the smallest and least desirable unit for 14 years while I added four more quads to my arsenal.

My experience has shown that it is best to max the number of units available in all cases. The VA, as well as Fannie/Freddie, max at four units for residential loans. The more units will lead ultimately to less risk (all things being equal).

You also need to better understand where you want to be in 5 years.  Will you be in key west or will you be in a place where you want to live the rest of your life?  Will you still be in the service (I did 30)?  This geographical questions helps you better understand how rental properties fit into your dreams.