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Transcript from the Live Webinar

Hello, everyone. Welcome to the Military Guide to Real Estate Investing. My name is Evan Kaufman, as I always like to say, your VA loan originator – licensed in just about every state with a major military installation – helping you with your VA loan and financing needs in general. Now, today is unique. This is our first of this series.

We’re talking about the Military Guide to Investing in Real Estate. If you might’ve watched before, we got a lot of other good content. I’ll talk to you for a brief second as we let some folks log on and get in. We’ve got a lot of good content here that we’ve started to put on our YouTube channel the last six months on the courses and stuff that we built.

The VA Loan Crash Course, the Buy vs. Rent for PCS decision making, the Sell vs. Rent your home when you’re PCSing, and one that we’ve been asked about a lot, because a lot of you, if you happen to know me – we do a lot of investing – has been, “Hey, what, how do I actually invest in real estate? Especially if I’m in my military career.”

And so, we’re going to touch on some of those points, but the thing I want to ask you is if you have any questions, feel free to throw them in the, in the comments box here below, because this is our first run at this. And if you’ve watched one of our others, we try to polish these presentations to get them better and better and just add more and more value and make it so that we keep the timeline down, but the full of value to make it worth your while.

So towards the end, if you got questions or some comments for stuff, please send them to me, put them down below because we want to improve this webinar. Just like we have every other webinar. A few of those webinars may have now been presented in front of thousands of people, thousands of guys, commissioning thousands of folks that are enlisting and now with YouTube, hopefully even bigger.

So we want to make it better. Alright, that’s it. We’ll see you. Hoping everyone’s in here so far for us. So the Military Guide to Real Estate Investing. My name’s Evan Kaufman. Brief slide about me. Essentially just says, hey, I’ve done a lot of real estate before, and primarily in the military space. I built a military, real estate brokerage, where I helped buy and sell real estate, and that was from as being a real estate agent and then real estate broker, and then ultimately a couple years ago stepped aside to build WeVett.

That’s a company that we cater to all of our military families moving around the country. So, less about me though, but more about the company of WeVett as a whole. Two separate businesses. One is WeVett Home Loans, focusing specifically on active duty families. We like to say for the brand as a whole, WeVett helps active duty military find and finance their next home.

And as you see there on the slide, we help active duty military find and finance a home for every PCS. So, the whole goal here is to help you, from our real estate to your home. WeVett Realty – connect with a quality real estate agent. And from WeVett Home Loans, that I run directly, help you with VA loans or conventional financing for your next move.

If you’re curious more about the businesses, QR codes are throughout the presentation. Feel free to take a photo of one of those. You can go to our website. Cool thing here in the next couple months, by the end of July, we should have rolled out. Our website should have a whole revamp again. We revamped it at the start of the year.

Then we’ve continued to get new input and redesign on it. And it’s going to roll out here in July. I think it’s going to be pretty sweet. We’re already continuing to rank up and have thousands of folks come each month. We’re going to get that in the tens of thousands. So be excited and look for that here in the near future.

All right, enough about us and the company’s sake, right? Let’s talk about some investing, get questions answered, and go through, hey, how can I build wealth while I’m in the military?

So, the agenda for today, if you’ve got any questions, again, throw them in the comments. I’m going to go ahead and pull any of those up towards the end here, and look at those and make sure we get them answered to the best of my knowledge with my past experience, having been a real estate broker, now building a mortgage company, and then also being an investor myself, um, purchasing a lot of real estate, owning over 30 units now, 40 at another point before that as well. Something that we understand well.

So, what we’re going to go over.

What makes a successful investment property?

We’re going to talk on analyzing opportunities and we’re going to get into some of the math of that. This isn’t just a fluff up, tell you, get you hoorah excited. We’re going to show you a basic pro forma and how to do that analysis. A similar analysis that I do whenever I’m looking at analyzing investments.

Then we’re going to talk about buying rentals with a VA loan, something that is very important, especially if you’re active duty right now, how can you use it?

And we’ll talk on setting goals and building your team, and then lastly round it out with some of the ideas on how to maximize value for your real estate properties, and then also to consider potential exit strategies in the long run.

Now, first, successful rental properties, what makes a successful rental property as a whole?

There’s a lot of things, and one of those, well I should say we’re going to have three bullets for us.

One of those is something you’ve probably always heard, location, location, location.

Classic, sometimes I roll my eyes like, oh man, it’s an overused phrase, but it’s very real.

The location of your property is essential, wherever that may be.

We have a, one of our other good presentations is on that, hey, should I buy or should I sell, and some of the considerations when buying a home, especially if it’s going to be a long term rental. And some of the factors you want to take into account for location’s sake is, overall, the city I’m going to.

If you’re military and you’re trying to invest while you’re PCSing, for example, you want to make sure that that market is a good market to be investing in.

Now, if you asked “Evan, hey, what are some of the things you might want to consider then?”

A couple of those are number one: population.

Looking at that city or area you’re investing, is the population at a minimum stagnant and ideally growing a little bit or a lot.

Population is a huge determinant of what happens with real estate prices in the long run.

Why is that?

Think of this. This town has 10 homes, and if the town has 10 people living in those 10 homes or 10 families, let’s say, if the population doesn’t move, good news is those 10 homes are still there. 10 people, yeah, one might degrade and they’ll build a new one.

Small, minimal, right? If someone wants to get real specific with me, had that happen before. Point is, 10 people fill 10 homes.

But if a population is declining, you had 10 homes, those homes just don’t necessarily disappear. All of a sudden you only have nine people, 10 homes, there’s an oversupply. The person, everyone’s trying to all of a sudden cut their rates to get those nine people.

Population declining can be detrimental. to real estate investments. Population growth is like the flip side. It can hyper fuel or speed up that those investment properties. That’s why you’ve heard maybe in like Sunbelt regions here, Texas, Florida, Arizona’s have been booming like crazy and property values have boomed more than other places.

A lot of that’s because population demand.

Another one on top of population, I can get more in depth to that another time though would be income growth.

And that’s one of the way that I would say income growth can offset or even exacerbate, that’s the right way of saying that, that population growth. And that’s where, if people’s incomes are continuing to grow up, go up, even if the population doesn’t change, the price points can still go up, or the rental demand in market can still go up, just because everyone’s starting to make more money.

It means that there’s the same, same people chasing the same goods, but higher dollar values, people start spending more money to beat out the others.

So, um, population demand is huge. And then I would say rental or say income demand is right there behind it.

Or if incomes are increasing or staying the same, that, for example, If you’re ever wondering, like I said, hey, population demand makes a difference.

One time someone was like, but Evan, California, everyone’s leaving California. I’m like, well, yeah, they’re losing a lot, but also breeding a lot of people being born. So it’s actually kind of even, but point is San Francisco, LA, some of the fastest growing income populations, the income there is expanding rapidly because of the companies and the profitability of those companies. That’s offsetting that demographic change in population.

So those are two big things you want to take into account when looking at a market. But on top of that, zeroing in on location, not just the growth of the area, who are the employers around there?

Is it one major employer that could make or break the whole city?

Is it multiple employers?

When looking at those employers and you’re looking at a specific property, how far are you from those employers?

That can be a big driver, not only if the property is going to rent, but who’s going to rent that property. If you’re trying to buy a home, for example. right next to a military base and you know you’re going to rent it out short term or something to someone that’s there coming in for travel or whatnot.

You want to be closer rather than further away or you know, “Hey, I’m going to rent this out to a military family. I need to make sure maybe I’m close to the base, but also consider my school districts because school districts are a huge determinant of value.”

And one thing investors can sometimes get caught up in is looking for the lowest price and highest rental return, but then they throw school districts out the window.

That can be relatively dangerous because you might end up with, kind of what we’ll talk about here on number three, property conditions can be a little bit harder in some of those areas where maybe the value hasn’t been kept up the same.

So, location is essential. There are just a couple ideas to consider when you’re looking to invest next part, positive cashflow.

Now I used to be fully in the camp. That guy under me, he got a station in Dayton, Ohio, uh, ended up buying rentals there, acquiring them, built, building them up. And, uh, it was a lot of like four units. We’ll talk on that here in a little bit, how you can buy a duplex, triplex, quad, live in one, rent out the others and stuff.

Um, but I used to be all in the camp that, hey, everything you buy has to have massive positive cashflow. And this was when I was starting to buy back in 2013, 14, 15, when I started acquiring the most of a, most of our rentals. And during that timeframe, the cashflow was fantastic because it was after the crash market was depressed, it was hard to convince people to even touch real estate.

To be honest, I was told, don’t do it. Don’t do it. Don’t do it. Now it’s like the inverse where I’m like, maybe you shouldn’t do it because so many folks are trying to do real estate. So if you ever feel FOMO, don’t worry. It’s at like a peak right now, it’s high.

It’s not always that way. Been doing it at least long enough to see that full cycle. So if you have fear of missing out. Just know there’ll always be another property that comes along. Life will continue on. But what I’m getting at for that sake for positive cash flow is I used to think you always had a massive cash flow.

The reality is there’s some markets that, hey, you might not need massive positive cash flow, especially if you have that appreciation portion pulling in where we talked about demographics of population increasing or income increasing. Some of those areas, it can be okay to maybe accept a lower amount of cash flow because you’re banking a little bit on that appreciation.

Now, I’d argue that’s a little more speculative. The folks who really focus on high positive cash flow, that’s a little, in my view at least, is a little more form of investing, a little more certainty, but you’re not banking on as much appreciation, but you know your cash flow numbers and you’re following along with them.

The folks who bank a little more on appreciation, I would say, hey, it’s a little more speculation, but still definitely a form of investing. The key there though, at least, is, hey – you can’t be negative for the whole course of the deal unless you somehow have some other massive sources of income that are helping to cover any losses.

So, you want yourself to at least break even, or if you’re negative at all, you need to be seeing that rental growth demand hopefully increasing quickly enough over the next one to two years to where all of a sudden, you’ll break out ahead. What I mean by that is I learned from a good friend of mine. We started buying properties at the same time.

Myself in Dayton, Ohio, him in Los Angeles, California. He was buying at negative cash flow, I was buying at positive cash flow. Today though, 10 years later now or so, all of a sudden, those properties and like their other areas that were appreciating rapidly and their rents were appreciating rapidly are significantly higher than even what ours ever were in those high cash flow areas of purchase.

Reason was because it had that high appreciation versus low appreciation.

Thing is though, that can be a little bit of a gamble, especially if you buy at a negative cashflow and then you’re banking on it increasing and it doesn’t, that could ruin you.

So be smart about it.

I would argue, make sure that, hey, at least cover your basis on cashflow and know why you’re buying what you’re buying, which we’ll talk on here in a second.

Property condition, an important one for making a successful property. There’s, well, I like to say your four big things that you really want to consider roof, siding, windows, and HVAC.

You gotta watch for those four things on a property because those will determine if you’re going to have a, what’s that movie like Robin Williams, or whatever money pit or a Steve, uh, I can’t remember the guy’s last name, but my mom loves the movie at least and always talked about it.

And so anyways, the money pit movie where they keep buy a house and they just keep putting money at money. I always have issues. You’ll want to watch for those big four things.

Um, there’s a lot of other things too, of course, foundation, sewer lines, all that kind of stuff, but your roof siding, window HVAC, if those things are looking old.

You better factor that into your analysis, and I’ll talk on that some on the proforma, but that’s probably where I see folks get bit the most.

You’ll buy a property and you’re like, hey, I’m, it’s a, let’s say a $300,000 duplex or $400,000 duplex, whatever, and you’re making a thousand bucks a, you’re netting 500 bucks a month, $6,000 a year, $400,000 duplex net in $6,000 a year.

Sounds good, but let’s take the amortization of that roof of that HVAC and of that siding.

If all those are at the end of their useful life, meaning they’re getting older and more dilapidated, a roof on something like that costs anywhere from 10 to 20 plus thousand dollars. HVAC, 10, 20 thousand dollars.

Siding and windows, 10, 20 thousand dollars. So if all those are at the end of their lives and you’re only netting $6,000 a year on this thing, I mean you could spend the next 20 years, 10 years just fixing those things back up.

So, we’ll talk about it in the pro forma – one thing that technically banks, lenders, and most investor gurus out there you’ll hear that don’t include it, I would argue you need to include it, called capital improvements.

And you need to account for those major issues and the potential of having them.

So what I personally do is when looking at a property, this is where like, hey, Evan, this, this price looks so good. Is it a great deal?

Maybe. Gotta see it. Because if all of a sudden that roof is shot and the windows are shot and we can’t negotiate that one out, then a property that’s maybe $20,000 more in cost, but they’re all new, could be worth it just to go do that than the one that has a shot roof and shot windows.

So, you need to pay attention.

Another thing about the danger of working at a distance, especially if you’re military, you want to have someone that you trust looking at that.

Your real estate agent can be a big trust factor, property manager, et cetera. We’ll talk about that in a second. But point is, what I’ll do is I’ll look at that roof and all of a sudden at that roof they say, hey, I haven’t, the roof’s 15 years old.

Depends on where in the country. A 15-year-old roof in like Florida, for example, heck, they like won’t even insure it. Let’s say it’s a 15-year-old roof. And I know in my, in that area, the typical roof, let’s say is 20-ish years in that range. So, I know there’s probably around five years of useful life on that roof.

Well, if that roof cost me $10,000 to replace and I got five years on it, I better prepare for effectively $2,000 a month, and a sort of amortization to prepare for that. And I better factor that into my analysis.

Anything beyond five years, awesome. I’m coming out ahead. But to run it like a true business, you need to factor those in.

So, what I’ll usually do is do a basic lifetime breakdown, effectively, of all those major components.

No, you don’t need to go into every little thing, but I’d recommend roof, siding, window, HVAC, going over those things, getting a rough idea of their remaining life, subtracting that remaining life. Let me see if I can do this math quick.

This is a new one on the slide. Subtracting that remaining life from the full life that you expect for one, and then you got to divide that into the total cost. By golly, let’s do the basic math on that one, right? So if you, like I said, the roof that has 15 years of use and maybe only five left. So if you use up 75 percent of it, You got 25 percent left in that roof.

You know that you’re going to have to replace it. It’s going to cost you 10 grand in five years. So, you divide that 10 grand by the five years, you know, about that $2,000 a year, you better start prepping for that’s what I’m getting at.

You want to do that for every major component.

So condition – huge on if the property is going to be successful, that is probably where, the most, I mean, dealing with hundreds of folks a year, helping them move, making decisions like this for a lot of folks that rent, I would say the condition is what ends up biting people the most in the first few years that they are owning a rental and managing a rental.

So, pay attention to condition. All right. Beat that one pretty well. We’ll talk about that some more now here as we go into a pro-forma analysis.

So, we’re going to conduct an actual pro-forma analysis. Don’t be too crazy. You can take a picture of the slide. We also have it online as well for you. But the key here is if you’re ever considering for investing, you’ve got to understand the basics of how to calculate your numbers and evaluate a property.

And we’re going to do that how I do it and one of the most basic levels to start here.

You can go down so many rabbit holes, factoring, calculating all different kinds of numbers, your IRR, cash on cash, all that good stuff. And I’ll gladly go over that with you as well. I’ve got some good resources on that too. Great books to recommend that have just influenced my investing career.

But really, we’re going to go over right now the basics of a pro-forma. Because if you can get this down, you can do it on the back of a napkin quick to just get a rough evaluation of any property. So the key with conducting a pro forma analysis, we want to evaluate and we want to consider.

So, we’ve got to evaluate a bunch of properties and we’ve got to consider if it’s any good. So now let’s pull up an actual pro-forma example here.

So, this is also taken, by the way, if you’re watching this and you’re like, Evan, maybe rent, rental, maybe not. Uh, I got a house that I’m living in, I’m PCSing soon, and I’m debating if I should rent it or sell it.

This is where like, if we could put the little asterisk in the corner, it says, watch this video, or maybe we put it down in the comments somewhere. We have a video, it’s called The Sell versus Rent Decision for when you’re PCSing. And in that one, I go over a pro forma example. And then I also show you how to calculate what’s called a seller net sheet, how much money you think you’re going to take away when you sell a home.

And that whole presentation is around this, a similar-esque discussion here. Hey, should I just rent this home out? or should I go ahead and sell it?

And I should help give you the tools to make that evaluation. Long story short of that one sometimes, just remember not every home’s meant to be a rental.

So even if you’re dying to be a landlord, just because you bought it on a PCS doesn’t necessarily mean it’s a good rental.

So, you want to take that into account. But this comes from that slide. Watch that one. It’s a, it’s a good one as well. So, all right, going into pro-forma example here, up front, you’re going to look at your income.

So, you got to take into account your estimated income. And I would say there’s two ways of doing this.

You could do it after you’ve already accounted for vacancies or use the past data that you have, or you could say, hey, what is the estimated annual income if it was fully occupied? – this is how I like to do it because I apply a vacancy factor.

So, let’s say I can rent this property for a thousand bucks a month. Then I would say an estimated income, $12,000 a year. And a lot of folks that go “cool, $12 000 a year.” Well, properties turn, depending on the property, it could turn every year, meaning that new tenants turn over, or it could turn every two to three years.

So, you gotta get an idea of what your, your vacancy factor is, and you gotta subtract that.

So, we have potential vacancies being next. As we put on there, typical 5 to 12%. A lot of that depends on the first slide, your condition of property and type of property.

So, for me personally, I also often overshoot if I’m dealing with like a one of our multifamily properties, I might shoot that closer to 10 percent to be relatively safe for how I know we set ours up.

But 5 to 12% would be, I’d say, a reasonable range.

How you can get some idea of that is if you’re buying a larger property, like we’ve dealt with before, 30, 40-unit properties. They’ll usually have a history that you can get some gauge on. And if it’s constantly showing 20%, then you might want to factor that in.

Or if you know that’s something you’re going to change that we’ll talk about later too, then you can always adjust it up, but you still want to run it based on the old numbers if you have them.

So, you can know that, hey, if I don’t do anything, is this thing going to be okay?

So, you got to adjust for vacancies.

Then you got to come out with that total potential income. You subtract the total, the total income that you could make. Subtract out that vacancy and you end up with a potential income. Now you want to pull out the expenses and right up front, we have what I would argue the expense that I always want to harp on because I see it forgotten most of the time, especially with active duty families who are going, “hey Evan, I think I want to rent out this house when I’m PCS in the next location.”

And that’s property management. Or, the young lieutenant who’s like, “I’m going to buy that four unit and I’m going to, you know, get four other people in there and I’m going to manage it myself. So I’m good. I don’t need to factor that in.” Sometimes I’ll ask people like, how much, what’s your cash on cash or what’s your return on property?

And they’re like 20 whatever percent. I’m like, wow, it’s cool. It’s great. Especially for today’s sake, right?

And it’s like, so what are you factoring for management?

“Oh, I’ll manage it myself. So I don’t count that.”

You have to count management no matter what.

Especially when you’re military and you’re PCS-ing, and let’s say you’re early at rentals, and you decide you don’t want to be in rentals anymore, and you need to hire a manager, you better factor for it.

Typically, 8%, 12% if you’re wondering what that looks like. Most times that might mean a 5 to 10 percent management fee, consistent management fee, and then maybe they charge you a first month rent, half month’s rent.

It can all vary by property manager, and it’s typically negotiable between property managers.

But expect overall 8 to 12 percent range. And you want to factor for it. Even if you’re managing it yourself, because it’s work.

You’re doing it. You better effectively act like you’re paying yourself, and then in case you get hit by a bus, or don’t like it, you can hire it out because you factored for it.

Next, property taxes.

You want to make sure you include those. So, uh, so that could be if you’re doing basic math, and you’re like, okay, hey, my mortgage payment, like if you already own the home and you’re deciding on if you want to rent it out, if it’s already all lumped into your mortgage payment, it’s escrowed in, you can just deduct your mortgage payment, then I have principal, interest, taxes, and insurance.

But to do it the right way, I would say, hey, you break it out, you take out taxes, you take out your insurance, and you take out your HOA dues, or any association dues that you have on the property.

And you break those out individually, because technically for a good pro-forma, you don’t want to include principal and interest up front.

So now you’ve taken those out, you have utilities.

These are any utilities that the owner is paying for. For example, a lot of small apartments that we’ve dealt with before, those will have like a light bill that constantly has to get paid for. Or some of our places have the trash and water are taken care of by us.

So, you want to deduct those and account for them. Repairs and maintenance, put a rough number on here for it. You always want to account for it. Even if you look at the last, usually keep in mind too, when folks sell you something, they’re usually selling it when it looks really good.

Like, “hey, it’s never had a repair for the last, for the last nine months, so Evan, it must be really good. I think I’ll only factor 10 for repairs.”

It’s like, wait, that might’ve just been good. Or they were deferring some maintenance, which is even worse.

So you need to factor in for some maintenance put on here is that rough range, personally, what I use just depending on property type condition again, 5% to 15%, here’s the thing though – that repair maintenance doesn’t include those capital expenses, which we’ll talk about here in just a second, because technically when doing a pro forma for bank, et cetera, most again, financial gurus out there aren’t throwing in capital expenditures. Whereas I personally will.

Yeah. It’s a buzz kill half the time, but it’s real and people can’t forget that.

So, repairs and maintenance though, that’s like not replacing the HVAC, but the furnace broke and you need to go repair it. So other expenses you want to account for taxing oddity and landscaping those things. And you can write those off to for tax purposes, typically – not tax professional, but you typically can – point being there.

If you’re paying extra for attorney prep, CPA work and stuff, those are things you want to take into account.   

Note, those are real costs. Sometimes people don’t include that on their rental proformas. And I’m like, well, yeah, you’re making a thousand bucks a year off that property – now slim margins. But if it increased your CPA bill by $500, that’s half your profit.

So, you want to account for that. Now, when you add all those up and you subtract them from that total potential income, you get income pre financing. Because remember the real goal with doing a true pro forma, you don’t want to include your financing in the numbers up front. It’s a separate equation, separate deal to deal with.

So, you want to know what your income is pre financing. And so that kicks that out for you there. And then I personally recommend you deduct at least one other thing, and that is on here for the slide, those capital expenditures.

And that’s that estimated long term cost of major expenses, roof, siding, window, HVAC, things for that. Some kind of cost pool or preparation for those.

Now, again, when you’re looking at most places in New England, cash on cash analysis returns, those usually don’t include a capital expenditures pool. But if you’re dealing with like a big purchase, dealt with some syndications before, large complexes, usually banks do start all of a sudden you have some requirement for capital reserves.

So, know that it’s done on a big level, you should always apply that even on a small level if you’re purchasing.

Then you want to deduct out your financing costs and that’s your real potential net income. So your real potential net income is whatever your cost of financing is, all that stuff together.

And that’s how much you know you’re really going to pull away roughly by the end of the year.

So basic pro forma, the whole goal of this is just give you something that you can do where like I personally can do this on the back of my hand on a napkin, take a picture of it. It’s a simple way of doing it.

Sometimes people make it look like there’s a million spreadsheets to do stuff. I’ve analyzed multi-million dollar deals and hundred thousand dollar deals with the same pro forma.

It works out relatively smoothly, gives you a good gauge on, hey, is this deal making sense for me or not? And helps me with that point number two, where we said, does this have the potential for positive cashflow or not?

All right. Buying rentals with VA loans. Now that you know roughly how to analyze things, I’m moving around, I’m in the military, how do I use a VA loan to buy things, I’m just going to start rounding out what we have for us, so it’ll go a little bit quicker.

But the key – VA loan – big benefit of it is that there’s low down payment or no down payment if you want.

We have another, a lot of good slides on that, VA Loan Crash Course, just did it before this, and a VA Loan Masterclass that goes into some of those benefits, but you have no private mortgage insurance, a lot of good benefits with it.

Now, the key with a VA loan is you want to work with someone that gets it because VA loans are a little unique of all the loans out there – only about 10 percent are VA loans and if you’re active duty, less about 10 percent of those roughly are active duty military members using their VA loan. So military is even like a smaller, smaller subset of folks.

So work with someone who understands that because there are nuances to so we’d obviously love to be that person – there’s others that can do that as well – but the key with a VA Loan from an investing perspective, the two biggest ways that we see folks use the VA loan is number one, house hacking, meaning younger Airmen, Soldiers, Marines buy a home and then they rent out the bedrooms, so they’ll rent the bedrooms, live in one bedroom themselves, that can work because the key to the VA loan is it has to be your primary residence to start.

So, they’ll buy it, rent out the rooms, and then when they PCS, they’ll rent it out as a normal rental, good to go, yeah.

The other way though, this route I personally took when I started investing, was I bought a four unit.

So you can buy a duplex, triplex, quad, and that can count as a single family home, primary residence, as a VA loan, if you’re going to live in a unit, and then rent out the others.

So, then that’s what I did. purchased a unit building. It was actually a little bit different because I didn’t use a VA loan up front. Used hard money that we’ll talk on some other ways here because it was a rundown property that we had to fix up.

So, I bought it with some hard money, took my own money, matched it, fixed it up, and then refinanced it out, right?

Some day, today they sometimes call it like a burr method. There’s all these words for it, but 10 years ago it was just struggling and trying to turn around a ugly dilapidated property with when there were so many foreclosures. But got that unit, turned it around, rent it all out, boom, went and moved, went into the next property.

But, the deal there is VA loan, you can use that for duplex, triplex, quad, which is pretty powerful.

Now, odds are, if you’re watching this, you might have watched some of my other stuff, I know I hit on those things in other videos. Here’s one thing with a VA loan, I’ll say. If you’re like, yeah, man, I get that, I get that, I get that, cause, most of you guys are on top of things with a VA Loan already.

Know this though, it’s unique. Since I started mortgages and we’ve helped a few folks deal with already, that if you’re buying a property and you’re like, “Evan should I just use a conventional versus a VA? But I know I’m going to use that as a rental in the long term.”

One cool thing about a VA loan is a VA interest rate reduction refinance finance loan (VA IRRRL).

That’s a streamlined refinance. That simply means that as long as rates have come down by at least half a percent and it’s been 210 days past your first payment, you can lower your interest rate into a streamlined refi.

No appraisal, no income verification, credit doesn’t matter.

We just got to check it to make sure you didn’t miss a payment.

That’s all.

Very incredible aspect of the VA loan.

Here’s the thing – if you buy a property and let’s say it’s conventional, you buy a property at a PCS, you rent it out, it’s conventional. You bought it at today’s rates, which are higher. and your PCS. And in the next two years, rates come down a little bit for you, and you can refi it.

You’re like, cool, I can refi it. Rates are lower. But then when you come to me and you’re like, “Evan, can I refi it?”

Well, it’s conventional. You now rent it out. You don’t own it as a primary anymore.

So, it’s got to be refinanced as a investment property.

So, when it’s conventional, you got to refi it as whatever the state of the property is at the said time.

So, all of a sudden, well, really, investment rates are usually quite a bit higher than primary residence rates. So really there’s no benefit. Can’t do it.

Rates are actually higher than lower for you because it’s an investment VA Loan. Unique thing, those VA IRRRLs can be applied to properties even if they’re rentals now.

So, what that means is you live in the home, you got that really good VA Loan interest rate, which is typically more competitive anyways. And then you PCS, and rates come down. You can IRRRL that property that’s a rental and get primary resident rates.

So pretty powerful. It’s typically going to give you a much better interest rate.

That’s like an unknown cool feature with VA Loans.

So next part here, financing strategies.

I threw this one in here beyond a VA Loan. There’s a lot of different ways. You’re like, “Evan, you always harp on VA loans. What’s next?”

Conventional loans, obviously. That’s actually what I’ve personally done a lot of for those four units.

Classic 25 percent down. Let’s buy that puppy.

That’s typically what we see for when I was buying all our stuff, acquiring it was 25 percent down by simple process, relatively simple process, put a lot of money down and go.

And I ate it that way, did it and built up our portfolio with classic conventional loans, very flexible 30 year fix, no extra private mortgage insurance, that kind of stuff.

They can be great. Conventional loans definitely still have their place if you’re willing or want to put decent money down to purchase a rental property, FHA loans can still work.

We like to say, hey, that’s not for necessarily a rental or treated like VA loans where it has to be a primary residence, but folks will use FHA loans in a similar manner to VA loans.

So it’s definitely something you still can use as long as you live there long enough, et cetera, and move out for the right reasons.

Private financing is another that can be a million different things, but I’ll use the example I hinted at earlier, hard money.

Like when I purchased our first four unit, ultimately I knew I had the upfront, I got my upfront capital, and then I raised from, ironically, an old teacher of mine, shout out to old Colonel Tewksbury, good man for having faith in me, made a whole business plan and everything.

I was like, all right, I’ll help you get the money. So a few folks from my network help give me that that money – from teachers ironically – and we went ahead then and they provided the hard money I purchased with my funds and then I renovated it, refitted out, and paid those people off. That was a what you today now sounds great.

Like a hard money loan that kind of deal – it’s effectively what it was right or private financing. Another one is seller financing. These work out pretty well, done this as well, , seller financing. It can be done where it can be for short term or long term.

An example I had before, gentleman was having an issue with taxes on a property. And so ultimately we worked out a deal where I knew regular financing couldn’t buy the property and a bank wouldn’t give it except for extreme rates.

And so ultimately worked out a deal where, hey, we seller financed, meaning that he agreed that I just pay him a flat monthly charge, effectively paying taxes and a little bit more for two years while I fixed everything up. And then refi’ed it again to pay them off.

Another way is you can just do seller financing where sometimes there’s people that own their properties free and clear. And they’re like, you know what? I don’t want to make a few percentage points in the bank, but I’ll gladly right now, interest rates are at 7%, 8%, let’s say for investment properties.

And they’re like, “Hey, Johnny, I’ll lend it to you at 7%, but I’m flexible, right? I’m not the bank. I’m more flexible.”

They make a higher percent return. You have a little bit more ease with dealing with them usually, but you want to make sure in those scenarios, you had a good lawyer. You’re working with the title company that helps you draft up good notes and deeds so that a seller financing deal can’t bite you in the end.

So seller financing deals, it’s important to still work with a title company or an attorney’s office to make sure you’re protected. I will say that, and make sure you think that one through.

So seller financing, though, can be a great option, especially for a lot of investors. And I have done that a bunch and really enjoyed it.

Syndication at the bottom there. Kind of, rather than making a bullet, I kept it as a broad topic.

Some people assume syndication is just the act of like it’s specifically a bunch of people got together and bought that massive apartment complex. I like to say it’s just partnering with other people. So that can be for big deals, small deals, whatever.

But just consider, hey, syndication is effectively the act of working with other people to acquire property and then sell it. Tip what you normally see, improve it, or hold it for future long term value.

Syndication is definitely something that can work. The thing I’ll still put on that is make sure you understand the arrangement of those.

Typically, you’ll have a general partner and limited partners, someone who has a little more liability and a little more responsibility than the others, and you just got to read what that breakout is. That’s become huge, I feel like, the last few years. Syndication, bias in that, you want to be careful.

The fine print, make sure you’re comfortable with what you’re signing and know that you’re getting into something that I would say the last few years has just grown to be.

So many TikTok Facebook gurus you got to be careful about, but it can be very beneficial and worthwhile though still just be careful.

So that’s another way though of investing, now setting goals building your team lets hit through these quick for us.

Key with the goals – set your objectives.

What I mean by this for military families is know why you’re doing this in the first place. The reason what got me interested in real estate again was when that old instructor who invested in me.

Thank you old Colonel Tewksbury at class, sitting there, 2010 or whatever, financial crisis, you know, everything was just blowing up, real estate was terrible, and he said, “Hey, whoever wants, I’m going to let everyone out of class 10 minutes early, but if you want to stay, I’ll show you how to be a millionaire.”

That was his statement. And I’m like, this is cool. Well, yeah, I’m assuming we’re all going to stay. I was the only kid that stayed in the classroom. Everyone else was like, heck yeah, 10 minutes off, I’m out of here. And then he proceeded to show me, hey, here’s how ultimately, when you’re PCSing, and you’re in the military, how you can become a millionaire.

And his whole concept was buy a property, rent it out, PCS, buy a property, rent it out, as long as it made sense.

We have some recommendations on that, but in the markets where it makes sense, buy, rent it out. And then at the end, his concept was 1031 exchange it all to a wonderful ranch down in Texas. That was the basic thought process.

The whole deal is it got my wheels spinning, going, all right, this isn’t so bad. I need to pursue this.

Point is you got to find your objective for it.

Is your goal, hey, I’m going to do this steady. Maybe I don’t want to be, you know, a full Real estate, have a full real estate empire, but do I want to achieve this at certain locations?

And then the end goal is to wind this all together. So I have, well, we like to say, is paid for near paid for a home or something by the time you get out of the military. What are you using your real estate, your real estate goals for you want to define that. And then you want to work backwards and break it out into bite sized chunks.

Okay. If I want to own, two million dollars worth of real estate by the time I get out. Two or twenty million, let’s say, right? Anywhere in that range. Work it back in bite sized goals, knowing what you’re going for.

The other thing I mark on here is passive income versus, like, appreciation. Talked on that a little bit earlier.

Sometimes you’re going to markets where you’re like, Evan, doesn’t cash flow though.

Well, I gave you a story earlier of my buddy who bought properties that weren’t cash flowing so well. Ten years later, coming out well ahead.

Know the markets.

They’re all slightly different.

Could be good or bad. But the whole point is: consider your objective.

If you’re a person though, that doesn’t do good with negative cash flow and you’re afraid of that, don’t do the deal that I was talking about when my buddy did.

Do what I did. You buy the properties that you know cash flow.

If you’re one though, that you’re a little more, you’re like, “Hey, Evan, I’m good with that. I see that future.”

Awesome.

Don’t go the more boring cash flow route and look at the other way.

Just know there’s a different type of risk there. So, think about that future what it looks like and then work backwards on what can help get you there now.

So, I touched on risk tolerance. I think that hit on that pretty well in regular review.

This is big, I have to give a shout out I am absolutely very fortunately married to a woman that I would say agrees with me in most cases, helps keep me in line and supports me in most things and actually pushes me to do better than others.

So very fortunate to have that. The key with a regular review is that you want to review that yourself to know, Hey, am I still on that track?

And this is what we want. But the reason why I mentioned my, my wife is that, hey, you need to do that as a team.

If you’re married, you want to make sure that you’re on this together.

The place where I’ve seen the biggest blow ups and issues is when, a duo, a husband and wife duo for instance, are not on the same page for going and investing and that can cause issues.

So, if you’re a young guy watching and you’re like itching for investing, you’re like you just gotta invest. And you’re married and maybe she’s not on board or something like that.

Calm down, take the time to work with her, to help walk through some of that, explaining why, what you’re trying to do.

And know that you should maybe balance out your goals with hers, get on the same page.

It is essential.

Essential.

Whatever side of the country you’re from that says whichever way that is, know that that’s a huge piece.

If you’re single, know that you want to make sure you factor that into who you’re ideally looking for.

But point is, review what you’re doing and review that with the person that you’re building your life with.

All right, rounding this puppy out, building your real estate team, simply saying, hey, pick the right real estate agents that understand working with investors, but know also that there are real estate agents and lenders and stuff that understand working not just with investors, but investors who happen to be in the military.

Because there’s some nuances there, no doubt about it, especially if you’re trying to use a VA Loan.

Or we know that you’re going to have a geographically dispersed real estate portfolio.

You got to think of those things.

Working with a lender, for example, the world that I’m in, “Hey, how are we using your VA loan eligibility?”

Are we using his hers?

Both?

Cause sometimes that can mess things up.

Who are we putting on loan? Who are we not putting on loan? What’s your goal?

Acquire as many loans as you want or not. You need to have someone who thinks those things through and have been there.

Obviously, I’d love to be that person for you, but, just know that whoever you’re working with, you want to make sure it’s taken into consideration.

Leverage your network.

There’s a lot of good folks that, that there’s a lot of good material out there. I’d say there’s also a lot of bad material out there.

There’s a lot of good material out there to try to glean from for military real estate material.

And I mean, just this morning, had a call with a good group of guys, crew dogs, concept of trying to help military Airbnb like stuff in the future.

Hopefully they take off and do well, keeping an eye out for maybe an article that we’re gonna give their basics on.

Seem like good dudes trying to get back in it and doing it, I think, the right way or a better way. We’ll see how it goes, but hope that’s for them.

But the point is, there’s a lot of folks that are interested in things.

Just know there’s also a lot of folks that are interested in anything that maybe, if they’ve only been in the last few years, you got to be careful still what you listen to.

I have done this from when it was bad to now good. I know that the reality, real estate isn’t the worst thing in the world. Real estate’s also not always the best thing since sliced bread.

Reality is somewhere in between.

So, make sure that you just pay attention who and what you’re listening to.

And lastly, communicate.

Communicate with whoever you’re working with. Maximizing value.

Holy cow, we got a lot of slides on this one. We’ll be shrinking this one down, I think, to make sure that we keep it in that half hour window.

But know, for maximizing your value, renovation, upgrades, and reconsidering best use.

What I’m going to hit on with this one is renovations.

That’s just looking at a property and going, hey, do I need to upgrade it? And could I increase my rental value?

If so, awesome, do it.

Upgrades, a little unique. This is where, like, if you see income adding opportunities, you should do it.

So, for example, multi units like that. We have sometimes we have the opportunity that if they’re right now we’re paying for the water if it’s relatively affordable to separately meter the waters we’ll do that because now for us it might be $100 a month charge.

But if we break it out to the tenants then we don’t have that charge anymore and it’s spread out to them a little bit differently, and typically we don’t see the rents change at all because people don’t honestly seem to care about utilities, it’s just like the bulk rent they look at.

Those are some ways that you can enhance the value of the property for you. Same with like putting in laundromats, putting in, um, ice bucket places or what, that kind of stuff.

Look for upgrades that you can do that can be income generators.

And lastly here I put on reconsider best use. This is big recently because it used to just be, hey, you buy a rental, it’s a long-term rental.

The last 10 years we’ve seen the advent and growth of like short-term rentals.

Just reconsider sometimes, hey, I have that home, is it best as a long-term rental? Could it be used for short term use?

We even had one the other day talking with a guy. We’re like, “dude, you need to destroy, tear that down and build a commercial property on it because now the street’s gotten so busy, it could be worthwhile.”

Sometimes think outside the box for the property that you’re looking at.

It could be commercial use, it could be short versus long term, swapping things around, pay attention to it, stay proactive.

And then again, regularly review, not just with yourself, but with the person that you’re building your empire with.

All right, getting for the exit strategies.

You always want to have that end goal in mind.

Make sure you know, hey, I could sell the property, refinance, or I could transition it to short, long term, vice versa.

The big thing is, whatever you’re going to do, you want to know that any of your exit strategies could have tax or capital gain consequences.

And sometimes people might be like, “oh hey, aren’t those two in the same, capital gains or taxes?”

Not necessarily.

Like, if you go to sell property, it’s not just capital gains taxes, there’s transfer taxes sometimes, depending on the state area you’re in.

So, you want to take into account, what are those additional costs when I go to sell?

Capital gains can make a big difference.

For military folks, if you’ve lived in the home, the old adage is two of five years.

Then you can be tax exempt for military that’s extended up to 10 years.

There are some nuances to it. Definitely talk with your CPA for it. But know that if you’ve lived in the home and you’re in the military, you got some extra exemptions there.

But keep in mind what your exit strategies can be long term.

All right. Q& A section.

I’m just going to pull that up to see if we have anything. If we don’t, I hope this is still really exhaustive for folks. We’re going to end here on this last slide as I’m pulling this up with our next steps. So know the basics of it are as I pull this up for us.

If you’d like any more information or want to see some more of those videos that I mentioned, these three QR codes, number one is to get a VA loan, conventional to work with that as well, but to work with a VA loan, if you’re interested at all, I’m happy to work for you to see your QR code fill out a form at WeVett.com.

If you need a real estate agent, especially one that understands military needs and military investment needs. Know that you can fill out a form at wevettrealty.com and that company will gladly help you out as well.

And lastly though, for the resources where this video and others will be housed, go ahead and access resources at WeVett.com/education.

And here in the next couple months, we’re going to see that grow and be enhanced significantly. So, watch out for that.

Alright, cool. We got a question from Ben.

Thoughts on buying a fourplex for my first property as a second lieutenant? Looking at $650k property in San Antonio,  fourplex.

Fantastic. I mean, my first property, I guess, was actually a house hack. Bought a nice home, rented out the room, and then ended up buying a four unit after that, and then renting out the others. I think it’s fantastic. One of the best ways that you can get going, especially when you’re young.

As a young lieutenant, one of the best things that I would argue you can do is minimize your housing expenses.

Why?

Because if you can minimize those housing expenses and keep your BAH as much as possible, even though it only, you might be saving five hundred to a thousand bucks a month versus if you rented out a regular property, that compounds drastically over your career.

I look back, the best decision I believe I made financially was making sure I limited my housing expenses immediately when I graduated because that allowed me to save that money up.

For example, bought that house, One of my best friends rented the room for me, almost covered the whole mortgage. I was able to save up an extra $1200 – $1500 a month roughly, because I saved my housing allowance from that.

Over the course of a year, that was $15,000 – $17,000 bucks or so, and in that year period all of a sudden, he decided, “hey, I gotta move, is it okay if I move?” And I was like, that’s fine, and I started looking for my next place.

So I went and rented the cheapest place for just a little bit, but I now all of a sudden had that $15,000 plus what I was saving, I had around $20,000, and then I could go use. And I bought my first four unit.

But if I didn’t do that little step of trying to minimize that housing expense up front at the beginning, I would never have gotten the first unit, which then I wouldn’t have saw the guy across the street, the older gentleman in the nice truck fixing the floor who I could have asked to buy that one.

And then the one down the road and the one down the road, the one before you got eight and got a couple of streets.

So that would never have happened if I didn’t try to minimize at the beginning.

So for you, second lieutenant, I think it’s fantastic idea. But in this environment, the key is making sure that the numbers don’t sink you.

So the tough one about it, San Antonio fourplex, awesome. Run the numbers on it, that basic pro forma.

Does it at least, does the cash flow at least cover your debt servicing and expenses?

The one thing that folks can run into today is that they’re still negative by quite a bit, but they’re like, okay, it’s still worth it because what I leave, I’d rate it out, I’ll be positive, you know, $500.

Well, if you’re making six grand a year on a $600,000 or $650,00 quadplex, that can be relatively dangerous.

Six grand a year sounds like a lot, but on a four unit, what if something goes wrong in that property.

If it’s a new build, okay, you might be okay for a while, but if it’s not, you’re not. Be ready.

One furnace, done. What if two furnaces go out, out of the four?

I mean, that could be an issue.

So, you want to make sure you’ve got adequate cash flow.

Great question, Ben. Hey, reach out to me. I’d love to talk that through with you. Been there. Love that enthusiasm and that goal.

I would say that can be one of the biggest things if you minimize that housing expense.

Where I’d argue I see a lot of people have success in today’s market, just because prices are higher than what they just used to be overall is house hacking. And that’s where if you’re young, single, and willing to have roommates and accept the risk, because there’s risks of house hacking.

The world makes it look like it’s great having four other roommates in your house with three beds or whatever, but there’s risks to that and sometimes uncomfortable things.

However, if it can get you back to where you’re minimizing that housing costs, it can make a big difference for your longterm.

I’m a bigger, I’m going to say I’m a relatively big fan of that because right now you can get decent values on single family homes and actually rent out the rooms enough, depending on the location and the people you get to actually cover the full mortgage or even come out ahead.

But it all depends on the area, personality, type, those kinds of things, but your head’s in the right direction, man. Either of those two setting yourself up for the future can be big.

And don’t be afraid that if you feel like, Hey, it’s, too much, or it might be too dangerous, then I would argue, if you’re trying to minimize rents, just get the cheapest place you can, try to split that with someone, and save up as much as you can to make sure that the next purchase you make is good for you and hits that pro forma sheet well.

So, hope that helps. I got nothing else on the table. Please, feel free to reach out to me. Thank you very much for the time. Again, my name’s Evan Kaufman. Any questions, fire them my way. Take care.

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2024 VA Home Loan Guide

VA Guide

This short guide is designed to provide you the most important details of the VA Loan in an easy-to-use format. Print it out and read at your leisure.

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