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How can you build wealth with the VA Loan?

Real estate investing has become huge over the past few years. I remember 10 years ago when starting to work in real estate and sell, folks just wanted to stay away from it entirely. That’s nearly a decade ago, and I remember back then it was like clawing to get folks to want to buy real estate. Well, today it’s like you almost got to push people away from terrible deals.

However, I still strongly believe that real estate in the long term can be great investments.

So, the question is, especially for our folks, we work with a lot of military families, how do I invest while in the military or from a military just got out, how do I invest in real estate in the first place?

Now, this is a topic that we could cover and literally spend hours. In fact, we’ve shot some other videos that go along with that. I know there’s plenty of courses and books and all that kind of stuff out there.

But really, we’re just going to hit on some basics here, the first few minutes of “where should I start if I’m in the military and I want to try to invest in real estate?”

Well, there’s a couple of different ways that you can get started investing in real estate. Now, one of those really depends on where you’re at in your life.

And so, having worked with hundreds of clients where we’ve helped do this, to buy and then invest in a piece of real estate and then turn it into a rental or immediately have it as a rental – one of the places where we’ve seen folks had the most success is when they’re early in their military career or they really just don’t have any dependents.

They don’t have necessarily a husband or a wife or they don’t have children that they have to rely on them, and they’re single and they’re on their own.

Because in those situations where we’ve seen some folks have a lot of success, getting out of basic training or just commissioning, is that they’ll go buy a home.

They’ll utilize their VA loan benefits – that’s where you can put 0% down if you choose or put money down and actually help improve the loan a little bit, but you can put low money down, not be punished by private mortgage insurance, and typically get really good interest rates.

And then they’ll either house hack that home, which means essentially rent out the individual rooms – remember, young, single, much easier to do that than when you have a family in the home – and they’ll rent those rooms out to essentially cover the cost or get darn close to it, allowing them to save up more funds to further invest in real estate.

Now, I’m going to tell you right up front that’s not always perfect. It sounds great, “Oh yeah, rent out all the rooms and make money, and ‘boom’, it’s just real easy.”

No, you got other people in the house with you, it’s still a tenant-landlord relationship, it can get messy.

However, if you work through it, it can also be very rewarding.

But we’ve seen a lot of folks have success in that early in their military careers or just when they have no real additional dependent obligations, and we’ve seen people have success with that.

So, house hacking a single-family home and utilizing their VA loan to get in with that, or they’re buying a duplex, triplex, quad, and kind of doing the same thing.

Honestly, it’s how I got my start.

I bought a house and we technically house hacked it.

One of my best friends rented the room out for just about a year, and then immediately we ended up going over into a 4-unit property, lived in one unit so I had my own private space, and then rented out the other three.

Now that, in today’s world has become a little bit tougher to, where it depends on how well the property is valued because sometimes even the three tenants can’t quite make up the payment, depending on the part of the country you’re in. But it’s another ability.

So that when you’re in the military if you can make it so your housing expense is pushed off you as much as possible for the home that you’re living in, that’s where you can really start to get a good basis for investing in real estate.

Why is that?

It’s because if you’re getting your BAH, your basic allowance for housing, or you’re out of the military. You’re recently out and you’re just making your money that you would put towards housing towards rent or whatnot.

If you can keep as much of that as possible – say that’s $1,500, $2,000 a month, which is what we see for a lot of BAH around the country – if you can save that up, that will make it so that within a year to two years, you can turn right around and so that when you make the next move, you can buy another property.

Or you can even save up enough money to have it and go buy a conventional investment property, putting 20% to 30% down if necessary to buy the next place.

And that’s really where I see a lot of people get their best start investing in real estate. Figuring out how to get your own primary residence, the place that you live, down to the lowest cost possible – either offsetting it or even making money off of it by buying a property, house hacking it by renting the rooms or buying a duplex, triplex, quad, and renting out the other units to help offset your housing expense.

Now, if you can’t do those two, which I know I’ve got a couple really good investor friends and clients that they had families from the start. And they wanted to get investing in real estate, and they didn’t want to do it necessarily in a duplex, triplex, quad.

Or they didn’t want to do it by buying a house and sticking their roommates in there with their five children as well because obviously, again, it gets messy and it can get really weird – a lot of folks out there say “it’s easy”, “it’s great” – I’ve done it all, and I’ll say it’s not perfect.

But in this situation where you don’t necessarily want that, I really come back to – buy something that’s extremely reasonable.

And that really means, okay, if you’re getting a BAH of say $2,000, we got to find something that’s really reasonable on your expense side.

It might not mean you buy the mansion – you buy something that’s very conservative from a house price standpoint so that, again, you can minimize your housing costs as much as possible to save up. And then that leads me into really my second point.

So, if you’re getting ready for military investing, think up front, how do I reduce my housing costs?

I ideally try to offset it or even make money off of it. And the way you’re doing that – house hacking, buying duplex, triplex, quad, or buying something that’s very conservative so that your cost of your primary residence is as low as possible.

But then the other major thing that I put even before that you got to prep for, to buy a home, and I leave it second though because I know it’s doesn’t sound as great up front, so we lose viewers otherwise, is you got to budget.

You got to get your finances together and understand how much you’re truly taking in and how much is going out.

Now, for a lot of our military families and even civilian folks and veterans who have gotten out, knowing what’s coming in is relatively easy, especially if your job is your primary income.

Then it’s okay, great, I’m getting X coming in each month from my paycheck, I know what I’m getting.

The hard part is knowing what is going out.

So, making sure you have a detailed budget – that’s looking at how much do I spend on my housing, how much do I spend on my fixed costs.

Meaning, things that you have to pay constantly recurring every month. Such as your rent, your housing, it could be even cars if you have payments on like your cars, your car insurance, phone bills, that kind of stuff, and then your variable costs, the things that sometimes move.

Documenting and lining all those out to really have a good understanding is important. And then, furthermore, following up and tracking that. And it doesn’t have to be crazy.

Personally, I love numbers, I love details, but I don’t necessarily like to do it over and over and over and over again for the same thing, but I love it in the first place.

So, I know for myself, being a little more free-spending kind of mind that doesn’t want to track every single small transaction, put parameters on that.

I would take cash out and when the cash was gone, I was done.

And it really helped prevent me from going over, whereas I think of my wife, she’s very good at tracking those items.

That’s why it’s wonderful now that we’re together because you combine those two things, it works out well.

But very good at tracking them, which allowed it to make sure that, hey, she never went over but didn’t necessarily have to have something like pulling cash out as restrictive to put in place.

So, there’s ways of doing it both ways, and we’ll have some more talks on that.

But just know that personal budgeting is something that’s extremely important to pay attention to when you’re going to be investing in real estate, period.

So, hopefully, that helps get a little kickoff in the mindset of how should you be investing if you’re especially in the military, military real estate investing, and where to go from a lot of resources out there.

This is just one of the starting points that we have. We got some other videos for it, but hopefully, this helps kick off some thought process for you on how to get it done. My name is Evan Kaufman, VA loan originator. Take care.

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2024 VA Home Loan Guide

VA Guide

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