Start with a House Hack

You can utilize the VA loan for a property of four units or less. Find a place to live that works for you, and rent out the other units to subsidize your mortgage. The additional income allows you to start saving for your next down payment immediately. Having a lease with your name as the property owner starts the seasoning process– banks like to see (~ 2 years) before lending on commercial property.

Landlord For a While– Yourself

Handling the property yourself will help you understand what to look for when you scale your business. It sucks– so do it until you understand enough to move on and don’t get caught up in the savings of self-management. Trust me; the savings do not surpass the opportunity costs. A year is a practical goal, as this will give you a full cycle on a lease.

Purchase Cash-flowing Properties and Concentrate on Economy-of-scale

Once you have a tax return showing rental income, banks will be nicer to you. However much you have saved, multiply that number by 5– this is the higher end of your price range. Look for properties that have cash flow between 2-4 units. Go higher if you can; just know that commercial real estate and lending requirements change for five units and higher. You will need to have a higher down payment and likely more experience for banks to lend to you. All banks are different, and it certainly does not hurt to try; just do your research and know what you are getting into with your investment.

Keep Buying Assets

Make it a goal to purchase AT LEAST one asset each year. Markets fluctuate– but the folks that survive crashes are the ones who bought for cash flow– not equity. When you have enough cash flow to sustain you, you can start targeting equity properties. This change in mindset only makes sense when you simply store your value in the real estate market as a commodity– similar to gold. Higher-end properties have a tendency to cash flow less but have fewer issues because of their highly rentable locations, quality of their build, and/or the occupants they attract: fewer problems, less cash flow, yet higher equity gains when the market increases.

Work Your Way Up to Commercial Real Estate

In secondary and tertiary markets (think cities without an NFL team), 5-20 unit apartment complexes can be bought as Joint Ventures or by wealthier people who understand real estate. 20-100 unit complexes are primarily purchased by newly established syndication teams raising money from groups of investors who focus on real estate. 100-250 unit complexes are the playground of major syndicators who have established track records as well as the systems to manage large-scale operations. 250+ unit complexes typically grab the attention of institutional money that will have enough money to make seemingly irrational purchases. It seems unreasonable to us as real estate investors, but remember these people are in a position to play the equity game. They are seeking to preserve capital (aka treat real estate like a commodity) and don’t expect the returns you will. Therefore, they can throw money at a stable asset and allow it to grow beyond the inflation rate.

Play Chess, Not Checkers

Create your own strategy. Look at real estate opportunities as chess pieces:

  • Smaller deals you can do on your own are the pawns. They are a safe move to get your game started but take a long time to get across the board. To me, the greatest thing about a pawn is that the moment you move them, you create opportunities to bring out the heavy hitters. Do not forget about them though, when used correctly, you can get them across the board and level up into a better piece without paying the tax.
  • Multi-family is your more dynamic piece. It’s a matter of scale. With relatively the same effort it takes to move a pawn, you can move these pieces across the entire board. Using these pieces takes a deeper level of strategy, and making the wrong move acquires a little more risk. However, once you have a solid understanding of what you are doing– you can quickly become lethal.
  • Your Relationships are the Queen. Through partnerships and networking, you can move in any and every direction you want to go. No matter what you want to do, the right relationships can get you there. Relationships with other investors bring you ideas and hone your strategy. Relationships with lenders allow you to leverage capital to fuel your next big move. Relationships with brokers let you know what the other chess pieces are up to so you can position your team to take them down. Relationships, like the queen, give you dexterity across the board.
  • The King is your Happiness. Always remember this. The only reason other chess pieces exist is to fight for and protect your happiness. Like in chess, it is easy to get caught up in winning individual battles while simultaneously losing the war. The second you forget your king– you’ve already lost the game. With every move, you should be thinking, is this helping my happiness? Is the move I am about to make part of my strategy or part of my ego?

With Mission First Capital, you can start your investment journey alongside other military members and veterans! If you have questions or would like to talk about potential partnerships or investment opportunities, don’t hesitate to reach out. Give us a call at +1 (844) 632-3863 or visit our website MissionFirstCapital.com to learn more and let’s invest today!