20 yr old USMC looking to invest

[Kyle Swenson]

Hey everyone I’m 20 years old in the marines in camp pendelton with 2 years left on my contract. I will be returning to Massachusetts and don’t want to rent. I have $25k in mutual funds and 40k in cash. I will most likely be able to get a VA loan with little to no money down. I am looking at 3 family homes to invest in. If any of you started with VA loans please let me know how it works and if I have enough cash to do this. Thanks

[Jared Viernes]

Kyle Swenson wow man you are doing pretty well for yourself!

First, the beauty of the VA Loan is you need very little money to start investing. Apart from closing fees, inspection cost, and those types of things needed to pay for with all loans the only thing you need to pay for is the funding fee which can be wrapped into the loan cost (funding fee is waived with 10% disability - make sure to claim everything when you get out I learned about my degenerative disc disease in my lower back which almost all grunts have when they get out).

There are some limitations though. First you must live in the residence to use the VA loan. As with any loan you need to prove income and job stability. So you will need a job which justifies the loan cost when it comes to your DTI. Additionally, a large family will require you to have a large residual income which lowers your income in the DTI calculation. I just left the military and cannot get a large loan because my current job as a real estate agent is vastly different from my previous military job and the income generated is not stable nor do I have 2 years proven profits. This allows me to count only my Reserve pay and my disability. With a family of 4 this essentially makes my monthly income as a lender sees it through VA lending standards almost non-existent. GI Bill payments don’t count either.

With the VA loan you cannot use the income from other units of a multi-family purchase unless you can prove property management experience.

With that being said you have plenty of money to buy using something with other than the VA loan. In fact, since you can easily afford a 20-25% down the extra few percent cost of the VA funding fee might not make sense. You could purchase your first multi family using conventional financing get you property management experience and then turn around and purchase you next using the VA loan.

Lastly, why the heck do you have $40k in cash? If you are trying to retain liquidity then put it in a low expense ratio, non-commission traded, short term bond ETF (like from vanguard). This way your 40k makes at least a small amount of return in the 2 years you are waiting so inflation doesn’t eat away at its value.