All Forum Posts by: Jack P.

@Jim Horne,

Yes, you can use your VA loan more than once, but only if the total amount borrowed is under the VA cap, and your properties are associated with your primary residence. Most military use it more than once because they PCS to another duty station, and buy again there. In @Adam Widder's case, he could only use it once in MN as long as he held the loan under VA terms.  

I have two houses under VA loans, but both are from different duty stations. I've kept them under VA loans and not refi'd because the interest rate on the VA loan is much more favorable than under investment properties (3% vs. 5%). Once you move out and refi, it becomes an investment property.

In his case, after ETS from the military, he is looking at living in MN and buying there. If he uses his VA loan benefits on a home, he can't use it again until the original terms of the loan are satisfied (either through sale or paying off the original loan). The exception that most military members use when PCSing doesn't apply, because he isn't moving locations.

However, he could use it again, while still holding on to his original purchase, if he moved to another region/state, assuming he still had some of the $424k entitlement left.

Bottom line, you can't use the VA loan to house hack multiple properties in the same town and keep them under VA financing.

A lease is a contract between two parties.  Once the terms of the contract expire, it is up to both parties to agree to renew the contract.  As a landlord, its no different for you to end the terms of the contract as it is for them.  If the tenants wanted the guarantee that they wouldn't be asked to leave, they could sign a long term contract.  In this case, they didn't, so it would be no different than if they unexpectedly gave their notice to vacate.  

That being said, I'd pick a unit based on the financials, and have their vacation as terms of the sale.  As mentioned above, your only requirement is to be a decent human being, and follow the law.  

@Adam Widder

Sorry to say that you can only use your VA loan once, unless a PCS requires you to move. That being said, there is a $424k cap on the total loan amount in MN, so that likely would only be enough to get you one multi-family property in the twin cities anyway. So, in your case, any subsequent purchase would require you to find financing other than that guaranteed by a VA loan, meaning you have to put some amount down.

In addition, your financing is still limited by your income. Just because the VA loan cap is $424k, doesn't mean lenders will give you that much.

Also, when you refi, you have to have 75% equity to cash out. By using the VA loan, you generally start with next to 0 equity, meaning your home has to appreciate in value, or your pay off the balance to reach a good enough Loan-to-value ratio. Unfortunately, with VA loans, the homes have to be in move-in condition, meaning minimal repairs required, if any. And those repairs must be complete prior to sale. That reduces the amount of sweat equity potential in a property.

Furthermore, any lender is going to want a stable income for approval.  There's difficulty in proving your income upon ETS from the military, as you don't really have a job until you get a paycheck.  You may have to settle in for a period of time (6 mo-1 yr) and establish your new income before a lender will approve you loan, but they may also work with you if your new employer can provide a statement of expected earnings.  

My advice, when you ETS, rent a house/apt in the Cities for a year.  Learn the market, and take the opportunity to inspect properties first hand.  When you have about 6 months left in your lease, then start looking to submit offers.  

Building a portfolio takes time when you're doing it passively.  After 10 years, I have 15 doors, and not sure how I could have any more while maintaining my day job.

Hope that helps.  Good luck with the transition.

I didn't put in there that your link to your calculator doesn't work, so I was spitballing.

If you were using $950/mo, then that makes it even more difficult.  

Using the basic 1% rule, the property would need to be worth $95k to generate $950/mo.  That means at $50k purchase price, I'd be limited to a $45k rehab on a 100 year old home.  Not sure that can be done correctly without cutting corners, or doing all the work yourself.

Also, I still own my old home, and it provides a little cash flow, but of all my properties, it has the most turnover.  My maintenance costs are low because my father lives next door, and is handy with small repairs.  If I had the PM do it, it wouldn't be worth holding onto.

Old homes create a lot of unforeseen problems, which make tenants less likely to renew their lease.  They are colder in the winter, which either cause high utility bills, or tenant discomfort, and both influence tenants to leave.  Unless it's rehabbed correctly, they aren't as attractive as newer homes, and will sit vacant longer.  Also in play is the small town.  Generally speaking, it's harder to fill vacancies in a small town because there is not a lot of demand.  You have to be very competitive to convince someone to live there, instead of, say, Lancaster.  

Simply put, from a strictly financial perspective, I'd rather invest my money in something more profitable.  However, if I were looking for something to work on as a hobby, then that looks like a lot of fun.  

I flipped and held a similar property a few years ago.  100 years old, needed complete gut job.  Spent $30k in materials and did all the work myself.  After all said and done, I probably broke even.  I don't regret doing it, because I learned a lot and it was a good way to spend my free time.  But I wouldn't do the same thing again.

If you're trying to look at potential comps, here's one:

https://www.realtor.com/realestateandhomes-detail/...

Assuming you can pull in about the same in rent, you'd have to keep your rehab under $50k, which may be difficult.  

Yeah, if she's willing to pay a year's rent in advance, I don't know why you would blink.  Not really sure why it would be a M2M lease though.  If she move out, does she get the rest of her prepaid rent back?

I always take pride in helping people out in a bind, especially if there is minimal risk.  The bankruptcy is kind of irrelevant if she pays a year in advance.

I'd say take the money, and she has a year to get back on her feet.

@Vashti Green

If you can purchase a 4-unit for $140k that has $700/mo rents per door, then grab it!  That's a great return!  

However, a $140k property that brings in $2800/mo isn't likely to be on the market very long...or there are some other variables that keep buyers away.  Most likely the property has one of the following:

A. significant need of major repairs (roof, HVAC, electrical...)

B. is in a bad neighborhood (high vacancy, turnover, and/or crime)

C. tax lein, or other financial problems

D. a combination of the above.

Remember that you're going to have to live there.  If you and your husband don't feel safe, then it might not be worth the trouble.

As for your long-term plan, just remember that you can't use the FHA loan more than once, unless you meet a couple exceptions (forced to move due to job relocation, growing family...).

Remember that you can factor in closing costs as part of the price negotiation.  For example, offer $138k with the seller providing $4k in closing costs.  That would reduce your cash requirement for closing.

Don't worry about paying rent yourself.  That's just handing over 10% more to your Property Manager that you could keep in your pocket, and doesn't give you anything extra.  I guess you could call them to fix stuff when it breaks, but then they're just going to charge you even more to coordinate the contractors.

As far as the price of the rent, I've read several times on here, and it makes complete sense. You don't set the rent, the market sets the rent. You have to be competitive in regards to your neighborhood, amenities, location, and other owners. See if you can get a peek of the financials from the selling agent. Sometimes they won't provide them until after the unit is under contract, but sometimes you can also access the rent history through websites like zillow (I'm assuming that's fed through MLS, but not sure).

Hope that helps.

@William Houstian, 

There are a lot of ways around the 20-25% rule if you involve partners, private money lenders, hard money, etc., but I wouldn't recommend starting out that way.  It's difficult to get your foot in the door because of inexperience, and you would assume a lot more risk.

As for your plan, remember that the lending programs that require less that 15-20% down also have a number of limitations. For FHA loans, you can only purchase a second property with FHA backing if your move is due to employment changes, etc. That is, you can't keep the same job and buy 3 houses with FHA loans in the same area.

If you want to make money fast, do a flip...or several.  However, those take up much more of your time and require much more work and risk to make money.

I would recommend looking at purchasing a multi-family fourplex to gain some experience and take advantage of the benefits of being an owner-occupier.  That, and take some time to set up your long-term real estate plan.  

I'm sure someone else has thought of it, but with the number of people on BP asking about investing in flips from outside the local area, is there an industry built around managing flips?

For example, I'm an out-of-state investor (small time) looking to buy a property in another location and flip it.  I don't have the ability to regularly visit the property because of my full time job, etc.  Besides a general contractor, are there professionals who manage flips for clients?  As in, someone to manage the general contractor to get the most out of the flip?  I realize that may be redundant, but a GC is generally concerned with making the most money on his job, and filling the clients wish list.  He doesn't really care what it costs.  

I'd say a realtor might be interested in that role, but their duties stop once the sale is complete.  

Think of it like a property manager, but the point of the flip manager is to prepare the house to make the most money on a flip.  As compensation, they get a percentage of the proceeds of the flip.  The owner wouldn't have to deal with contractors, vendors, etc., just big decisions, like how much to spend.  It would also apply to rental properties where the manager may not have the capacity to apply any level of appropriate oversight on a larger project.

I started thinking about this after I had my property manager coordinate to rehab one of my units.  They received 10% of the cost of all the work they coordinated.  I thought to myself that would be a pretty cool job to coordinate the flip/rehab.  Basically, you're spending other people's money to rehab a house, within certain parameters.  

Is this already an industry?  What licenses would you need, GC or realtor?  Any other obstacles? 

@Maggie B.

My recommendation is to just factor in the cost of utilities to the rent.  Basement apartment tenants (having been one myself in DC) are looking for a hassle-free unit, and having to pay separate utilities is a turn-off.  Besides, doing the cost-benefit analysis, how long would it take to recoup the money you spend on installing separate meters?  I'm assuming it's not very large, and the utilities consumed by the basement are negligible compared to the rest of the house.

If you're looking to rent the SFH as well, I would say offer a rebate for utilities to the SFH tenant (maybe $100/mo or a percentage of the usage).

As for the Cert of Occupancy, can't help you.  Don't know much about it.