Why I Started Green Vet Homes
A lot of people have asked me lately how this whole investing in homes for homeless vets thing works.
So I decided to break it down for those who might be interested in trying their hand at their own purposeful business.
Let me start with why I started this business in the first place. I love entrepreneurship, real estate, and the idea of investing in tangible asset that I can actually put my hands on and personally affect for the better over time.
Unlike stocks, real estate is something I can invest time and money into now, shape and improve (ie rehab) and will be something that continues to kick off returns long into the future.
I dove in and started learning the real estate investment business 10 years ago while serving in the Army and then full-time after leaving the service.
At the same time I was running my business, I started working with other veteran entrepreneurs through a great organization called The Bunker, and discovered how much I enjoyed working with and helping other vets.
So I sought out the best way to combine these two passions and discovered the Veteran’s Affairs Supportive Housing (VASH) program.
How It Works
The VA has a reputation for big bureaucracy and lots of red tape, so I was a bit leery at first, but the VASH program operates as it’s own team within the VA has been really great to work with.
The basic jest is that the VA provides a portion of the rent for a homeless veteran through a voucher that allows that veteran to rent a property that meets certain guidelines. The homeless vet is also assigned a VA case worker who meets with them regularly to work through a plan to get back on their feet.
This is how I structured my business to work hand-in-hand with this program.
Step 1 - Find the right property
The best properties typically come directly from my marketing to potential sellers (signs, postcards, letters, etc) and many of which are properties difficult to sell (inherited, lots of work needed, upside down, mold, hoarder houses, etc).
I try to come up with a solution to whatever issue the seller is having. The biggest key to being a good real estate investor is just being good at helping people find a solution to their problem.
The perfect combination of features that make up the perfect veteran rental is more of an art than a science. However, here is a list of the main criteria combination that makes a great rental property for veterans in need:
-The right location – Good combination of safety for your veteran tenant, affordable purchase price, and high voucher amount offered by the VA. In Cook county (outside of the City of Chicago) the voucher amount paid by the VA is based on zip code and bedrooms (How Rent is determined in Cook County) so I always consider these 3 factors when deciding where to buy. I like the south suburbs for this reason.
-Built 1960 or newer - Rehab is much easier, trust me.
-Low taxes - This sounds like an oxymoron for Chicago area. I just mean comparative to the rest of the town you are buying in.
-No basement if possible - Basements are nice for resale, but also where a lot of your maintenance dollars will go over the years.
-Surface rehab needed - Think Grandpa’s house, where the decorations haven’t been changed since the 70’s, but mechanicals have been updated meticulously = perfect rehab.
-Cash flow exists - Cash flow is what you have left over of the monthly rent payment after you pay mortgage, insurance, taxes, and set asides (I do 10% for maintenance and 10% for vacancy). A decent cash flow allows you to buy more houses faster. Here is a great rental calculator to help you analyze rental deals for yourself.
-Some equity – Many people get solely focused on cash flow when investing in working class areas and justify no equity or negative equity. You want at least 10% equity once your property is rehabbed to give you the flexibility to sell or refinance if needed.
Step 2 – Rehab the property
I hire individual contractors that specialize in the work needed.
Screen many contractors, look at references, and be specific as to what you want done and timeline required. The more time spent here the less headache later on.
Step 3 – Line up the tenant
While we are completing the rehab I contact the local VASH office (in Chicago the office is at Hines VA Hospital) and let them know about the property I have for rent.
They help line up a veteran that has been screened for the program who would be a good fit for my property.
Step 4 – Understand the admin
The big aspect that many overlook (especially when first starting) is staying on top of the paperwork and inspections. I just had 6 inspections for my most recent veteran rental between the pre-sale, rehab inspections, and VA/HUD safety inspections.
This can be painful if you don’t know what paperwork to fill out or what the inspectors are looking for, so talk to the building department in the town where the home is located, as well as the VASH office about what specific paperwork and inspections will be required.
Step 5 – Move your veteran tenant in
This is the best part of the whole process. All of the hard work in the previous steps are worth it when you can give someone a new start at life and see how grateful they are to have a great place to call home.
You sign a lease just like you would if renting to a regular market tenant, spelling out exact expectations. I also recommend staying involved with regular walk-throughs and communication about how the house is working out for them.
Many landlords shy away from renting to homeless vets because of the perceived risk or extra work involved.
Although some tenants might be working through some tough times that could present some unique challenges, the positive impact these homes have had for the veteran and have had on my own life, has far outweighed the challenges that I’ve experienced.
For more info on taking the plunge and renting to veterans yourself visit: http://www.va.gov/homeless/landlords.asp