All Forum Posts by: Sean Hudgins

@Kyle Butters Welcome to the community! Virginia Beach is a great place to be, and the Hampton Road area as a whole is a decent place to learn the basics of investing. Now, as @Mike Klarman said, VB is pretty pricy and, depending on what your strategy is, may not be the easiest for a new investor. However, that's the upside of this area. You can go to Norfolk, Suffolk, Hampton, and Newport News and find pretty good cash flow that you couldn't find in VB or Chesapeake.

Your first step is to determine what you want to invest in and come up with your criteria. Even before getting too far into building a team if you are buying STRs, your team is going to look very different than if you are buying Long-term Rentals or Fix and Flips. Then, you build out your team. Obviously, having a solid contractor is a must, but that could look different if you are doing major renovations or if you are doing minor cosmetic stuff. 

Have you done some research into what kind of investing and the type of property you are looking to get into? If so, It would be great for all the people here to help if you lay out some of that, and we can steer you in the right direction.

As for meet-ups, there are a couple of REI Groups here. Here is a good starter https://www.biggerpockets.com/forums/521/topics/1161599-real... This one is an investor social at Big Ugly Brewing in Chesapeake. 1/23/2024 5-8PM.

If you want to connect and talk strategy and getting started feel free to reach out! 

The house hacking strategy is the absolute best way to get started and comes with much lower risk levels than other strategies. If you consider that even if you don't manage to get a deal that. eliminates your housing expenses, you can most likely find a deal that puts your living expenses lower than even renting a cheap apartment. Like @Sean McDowell said, the sooner, the better to get started and build that equity.

Using the VA loan to buy a house hack works pretty much the same way a typical VA loan purchase on a single-family home does. You can get up to 4 units with the VA loan as long as you are occupying one of the units. I suggest you find yourself a great agent who understands house hacking and VA loans and get a good lender. Then, depending on your market, I would try and get as many units as possible up to 4. Then, after a year or 2 of living in the property, I would try and go do it again. Feel free to reach out if you have any questions or need recommendations on lenders or agents!

I am sure you are doing the math right and obviously, I don't have all the details, but this is what im looking at.

Current NOI: 3686

$300k Mortgage @7.5%: $2098 per month

New NOI: $1588

Rental Portfolio Value: $770k

Rental equity Position: $470k

Portfolio Value and Equity Position if you sold: $385k

If you sold, your NOI would be $1843, so $200 more per month than with the cash-out refi. You are right. You would not have the $100k cash to reinvest, but you would cut your portfolio balance in half and create a lot more work to get it back up to the current value. You mentioned you were going to use BRRRR to build the portfolio, which means you are looking to purchase distressed properties. Unless you are a super experienced renovator and have been managing multiple flips at the same time in the past, having the extra $100k is not all that important. You are likely going to start out by purchasing one property at a time, renovating them, and then stabilizing them, and unless you are looking to purchase in the $700k and up range, you have more than enough equity in the primary to use as your bridge financing through the HELOC... now if you are an experienced rehabber and you want to take down multiple projects at once then the $100k could get you one more property and your velocity of money would then probably be a lot higher.

Ultimately, you have to do what is right for your situation and risk tolerance. But in my opinion, removing the property from the portfolio means that you will then have to do months of work to get back that asset value, and if you are doing the BRRRR strategy, you will be mortgaging the new property once its stabilized and your end game after all the work on your first rehab will be pretty much exactly where you would be if you did the cash-out refi.

What are the rentals worth? Even with the high rates right now, if you can Cash Out Refi one or both rentals in lieu of selling one, that would allow you to keep the property, and you can use that to pay off the primary. For example, if each rental was worth $300k, you could cash out 50% on each, and you would likely still cashflow well on both properties. Or better yet, cash out the primary home. You could get a lower rate than you would on the rentals, and you could then still get the HELOC on top of that on the primary.

What is your reasoning for selling your rental? Unless the rental is underperforming(and if it is, why... is it something that can be fixed?), keeping the assets is the best way to build a large portfolio. Do you have to sell the rental in order to pay off the primary loan? you could look at a Refi for the rental or both rentals, trying to optimize the return-to-leverage ratio and use that money to pay off the primary and get your HELOC.

The Tax stuff aside, I liked what @Morgan Gutierrez said. That new build will only be new for a couple of years. If the new build-out performs an existing home in your area, I believe it makes sense as long as the numbers work out as you have described. 

The only caveat I have to that is the builder... if it is a builder that is known in your area for doing a great job and building a quality product, then go for it, but if it is a builder that is known for slapping homes together and has poor quality construction standards then I would go with the home that has been standing for 50 years before I invested in a building that was built without sound building practices as some production builders do.

@Darian McMillan , this strategy is definitely viable in VB and, honestly, in most areas, even in the strictest STR regions. I do have a couple of thoughts for you regarding the strategy.

Let's just assume you follow the STR Home Share method. Have you considered that if you purchase in VB (not in one of the STR zones), all the hard work you will have put into getting your ABNB/VRBO rating up to 5 stars will be thrown out the door when you PCS out of the area? Notionally, you are stationed here for three years, likely right about when you hit your groove. You will PCS to a new location (depending... I liked it here and was able to stay for three tours personally). Either way, as soon as you move out, you will need to pivot to a new strategy unless there are significant changes in STR rules, and I don't see that happening in the next four years. And that means that your efforts to perfect your business systems for STR home share will be useless.

Now Norfolk is less strict, and you could find something in that area that would be STR viable (watch out for the Aircraft Crash Zones). The flood insurance can be worked around depending on what area you are looking at; believe it or not, some of Norfolk does not need expensive flood insurance.

Beyond all of that, I do agree with others that starting a Home Share or any STR is a Business. You should also have a solid plan for deployments if you're on sea duty.

Flipping is a great way to build your war chest, and renting is a great way to keep that money growing and working for you. You must get clear on your goals and what you want to do. 

What are your finances, do you have more money than time or do you have more time than money, and what are you trying to get out of Real Estate investing? 

 If you have the cash to do the purchase and rent, that is great. Honestly, for your first deal, that is a great way to keep carrying costs low, and you will likely carry the property longer than you plan on your first deal anyway. It also gives you a chance to build up a portfolio of successful flips before you start going to hard money lenders and private investors to get more cash to do more deals. 

Once you build that trail of success, then I think it makes sense to start using leverage to grow your business quicker and supercharge your money's rate of return, but by no means do you have to do it that way.

Best of luck and we would love to hear about your first deal when you get started!

 I have done it both ways, and it has worked out. What I will say is if you are buying materials for a job, never, and I mean NEVER, let the contractor be waiting on you. If you insist on buying the materials and then don't have everything they need, that is a surefire way to sour the relationship. 

Also, if you are insisting on a certain product because of your specs, like a certain brand of paint, I suggest you only go that route if the product you want is of superior quality to that of that contractor's base product. I purchased my own paint for a project, but I bought great stuff, and the painters thanked me and complimented my choice. I wouldn't set your contractors up for more work than necessary, as the labor will likely end up costing you more than good material.

The bottom line is each contractor and investor is different. I would feel a lot more comfortable buying material if I am acting as the GC and closely overseeing the project; however, if I'm only going to be at the property once a week or less, I would likely get a quote for the finished product and let the contractor do the work of sourcing material.