where do i start?

Question

Becoming a successful investor is my dream. I am in the military and am starting from scratch, living in San Diego but from Arizona.

Dan H. · Answer

@Gilbert Martinez

Thank you for your service. Do you like San Diego?  If you do I would look into house hacking (search BP if you do not know the term) a duplex to 4-plex using the VA loan.  You should be able to find something that would be cash positive or very close to it if all units were rented.  Cash positive to me includes vacancy, maintenance, and cap expense.  Cap expense is missed or under estimated by many first time investors (research it on BP).

Let's assume that you purchase a cash neutral place which for a first timer in San Diego would not be bad. You will be living in one of the units for what amounts to market rent.  However part of each payment will be going to equity.  So Cal has traditionally appreciated very well, So cal rents have traditionally appreciated well.  But let's take a slightly pessimistic stance that rent and property value does not appreciate at all.  You would be living in San Diego (a great place to live) at market rent while having equity gain from the payments that are significantly made by your other tenants.  Most important you are learning about REI and property management.

Now assume rent and property appreciates like it traditionally has in San Diego.  Soon that cash neutral property is cash positive. But due to being able to depreciate the structure you pay no taxes on this cash positive "income".  The property appreciation increases your net worth and due to prop 13 your property taxes barely increase even if the property doubles in value.  Taking the money out via a refinance or HELOC also results in no taxes until you sell the property.  When you sell, purchase a property with at least equal value and never pay taxes from the property value gain.

Most important part, learn about REI the entire time.  Your next purchase you can be the experienced expert that can find the great investment opportunities.

Good luck.

Penny Clark · Answer

@Gilbert Martinez,

Welcome to the BP Family! Start by educating yourself using all the free resources here (weekly podcasts, blogs, investor guides, calculators and other tools and, of course the forums. You have a wealth of information at your fingertips that is truly priceless and the support of other investors to cheer you on!

If I were you given your military background (BTW, thanks for your service!), I would take advantage of using a  VA loan (no down payment) and start analyzing investment opportunities for duplexes, tri-plexes and four-plexes on line (Realtor.com is the best because inventory is updated every 15 minutes unlike Zillo and Trulia). However, if you acquire a property with a VA loan or an FHA loan you will have to occupy one of the units. San Diego can be pricey, so another option would be to look at cities or towns in Arizona that you are already familiar with, especially if you have personal connections there. It would require a larger down payment because you'd most likely be doing a conventional loan at an investor rate. If you are doing long distance investing, you'll want a good team in place.  You may even consider partnering with someone to share title and financing with to occupy one of the units and handle management of the other tenants. If they are military like you they can use a VA or if not, how about using an FHA with a low down payment?  Real estate investing relies on creativity and you'll get lots of tips and ideas here on how to make your deals work.

The most important thing is to first educate yourself, practice analyzing deals and get your finances in order so you can get approved for the loan, be it with private money, the VA itself or from a traditional bank.

Once you acquire that first property, put systems in place to make land lording (managing tenants living next to you as in a duplex or managing tenants from a distance (Arizona)) stress free. You WILL make mistakes but that's how you learn.

I hope that helps and best of luck to you!

Shawn Hughes · Answer

Welcome Gilbert,

As a veteran I too am looking to get into REI. This year I will buy my first property with the VA loan to live in and flip. My ultimate goal is to do note investing. So I'd say find your focus and learn all you can and network for that type of specific investing. Good luck.

Kevin Fox · Answer

Hey @Gilbert Martinez

Thank you so much for your service.

As an active/former member of armed services, you should absolutely take advantage of the benefits the VA loan offered.

Feel free to reach out if you'd like to chat about the best path for you to take in REI.

Gilbert Martinez · Answer

I'm interested in finding out which strategies will be a better fit for myself being in the military starting  from the bottom.

where do i start?

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