What to do with savings

Question

Hello all, first time posting and wanted to ask for your advice.

currently in the military awaiting a 9-12 deployment within the next 6 months.

I will have ~150k savings after deployment, 85k before, with no debt, payments or anything other than basic bills, 750+ credit. Currently single, no kids or anything. I am pretty handy and have done plenty of restoration work myself and not afraid to put in some elbow grease.

looking into real estate to get the wealth ball rolling but feel a little uneasy given the current state of the economy.

what would you do in my shoes?!

Thanks in advance!

Austin McClain · Answer

House hacking (living in one unit and renting the others) is how I started. It's a way to leverage with little down payment (none in your case) in an appreciating market

Zeke Liston · Answer

Thanks for your service, Charles. I would certainly take advantage of the 0% down VA loan option and purchase a 2-4 unit property. If you're flexible on where you live, I would research and invest in the market that's best for you. After you purchase your first property, I would use some of your savings to do a BRRRR or a flip and potentially a rental as well. You'll be able to keep snowballing the money from the BRRRRs and the flips to build up your portfolio.

Samuel Diouf · Answer

House-hacking is one of the best ways to get into real estate investing. You’re able to learn the basics of a real estate investment with lower risk and build equity at the same time.

Because you're in the military, you'll be able to enter a property with 0% down which means you can leverage your money way more effectively. When you’re investing with leverage, I  think it makes more sense to do it in a market that’s showing plenty of signs for growth.

Nathan Gesner · Answer

Yes, you could use your VA loan. However, it will be hard to make the numbers work if you are borrowing 100% of the purchase price.

As others have said, house hacking is probably your best option right now. Buy a large house, or a duplex, triplex, fourplex. Live in part of it, rent the rest out. But not every property will work. You should learn how to analyze property to ensure it's going to pay for itself.

A couple suggestions:

1. Check out Military to Millionaire on Instagram. Former Marine that started investing while he was still on active duty. He has a book and good, practical advice.

2. Start with BiggerPockets Ultimate Beginners Guide (free). It will familiarize you with the basic terminology and benefits. Then you can read a more in-depth book like The Book On Rental Property Investing by Brandon Turner or The Unofficial Guide to Real Estate Investing by Spencer Strauss.

3. Watch the BiggerPockets podcasts. This will clarify and reinforce what you are reading. You can hear real-world examples of how others have built their investment portfolio and (hopefully) learn to avoid their mistakes.

4. The BiggerPockets store has books that will teach you how to analyze properties. They also have calculators to analyze deals, and I highly recommend you start this as soon as possible, even if you are not ready to buy. If you consistently analyze properties, recognizing a good deal will be much easier when it shows up. Find Brandon's videos on YouTube for the "four square" method of analyzing homes and practice. It doesn't take long to learn how to spot a good deal.

5. Study the market. You can learn to do this independently or get a rockstar REALTOR to lead the way. I highly recommend a well-qualified REALTOR who works with investors and knows how to help you best.

7. Jump in! Far too many get stuck in the "paralysis by analysis" stage, thinking they just don't know enough to get started. You could read 100 books and still need to learn more because certain things must be learned through trial and error. You don't need to know everything to get started; you need a foundation to build on, and the rest will come through experience and then refining your education.

You can build a basic understanding of investing in 3-6 months. How long it takes to be financially ready is different for everyone. Once you're ready, create a goal (e.g., "I will buy at least one single-family home, duplex, triplex, or fourplex before the end of 2019") and then do it. Real estate investing is forgiving; the average person can still make money even with some big mistakes.

Ethan Slater · Answer

Charles, as others have said, thank you for your service! I am currently active duty myself, learning as much as I can about real estate investing and the opportunities that it can offer. Here are a few things that I have learned recently:

1) Keep crushing your personal finance. It will open doors for you in the future to accomplish your goals!

2) I think it is important to remember a key part of the VA loan entitlement. While others above have highlighted the ability to purchase a property with 0% down, there is one large stipulation: you must purchase a property as a primary residence. This doesn't mean that you can't purchase a multi-unit (duplex, triplex, etc.), but I do not believe that you will qualify for VA loan entitlement if you purchased a property that is not your primary residence. See source: https://www.veteransunited.com/valoans/occupancy-requirement... You could certainly invest in other markets (that are not your primary residence), but you just are not allowed to use your VA loan entitlement.

Happy to connect and continue to learn about real estate investing opportunities together!

Jimmy Lieu · Answer

Hi Charles, thank you for your service! I suggest looking into house hacking if you're flexible on where you can live. You can buy a duplex or triplex, live in one unit, and rent out the others. This way your tenants essentially pay your mortgage while you're deployed. Columbus OH is a fantastic market to do that. As an investor here myself, I can tell you we're seeing solid rental demand here thanks to the strong job market and major employers developing here. Happy to send over some resources regarding the Columbus Ohio market and why it's a great market to invest into!

Shawn Mcenteer · Answer

Hi @Charles Fay it sounds like you are in a very good spot with finances.  To me house hacking is one of the simplest ways of jumping into real estate an acquiring properties, especially if you are handy.  Implementing a value add strategy, which will raise rents and force appreciation has been an unfair advantage in just about any market condition.

Jason Wray · Answer

Charles,

Good news for you since you are a Military member is you do not need any money for your first home purchase.  You must already know now you get 100% when you use your DD-214/certificate of eligibility!  That beaing said you should focus on buying a 2-4 unit Multifamily the more doors the more cash flow.  Live in a unit for 6-12 months and move out and rent all of the units.

Then refinance the property into a conventinal loan freeing up your entitlement and buy another property.  The cash you have on hand in liquid reserves allows you to focus on properties that "Are Not" turn key and could use a little TLC or renovation.  That allows you to buy under market value, renvoate and then in 6-12 months refinance and pull some cash out.  At that point you will be using the cash from appreciation/equity instead of your funds.

Each time pulling out the intial capital and enough to put down on another property growing your REI protfolio.  Don't be afraid to look at other markets since you are not married some states offer better purchase to cash flow ratios.

States like Indiana, Ohio, Tennessee, Georgia, Florida etc.   States like CA, NY, CT, NJ, MD are notorious for high sale price homes, higher taxes and hard to cash flow.

What to do with savings

Most Popular Reply