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Posted about 10 years ago

How Veterans can Leverage their benefits to Create Wealth through RE

The VA has no title seasoning requirements in order to cash out using market value.

This is a huge difference from conventional 1-4 lending because there are many restrictions for title seasoning (how long you have to wait after you acquire title to property).

So how this could be utilized is if you were a veteran looking for a home and purchased a property for 70% of market value with cash (has to meet VA standards/owner occupied only) you can immediately cash out up to 100% of the market value with proceeds going back to the borrower (borrower of course needs to qualify to do so).

Just a quick way that a vet who is also an investor can leverage their new found equity in other investments to have their money work in multiple areas. As long as the cash flow is strategically planned and reinvested at higher returns this can be a great way to reposition "idle," equity and put it to hard work.

This would allow the veteran to obtain money around 4.5% (6.08% Annual mortgage constant) If you could reinvest at or above 6.08% annually then the vet could end up being able to live for free if the other investment cash flows sufficiently.

How this could play out:

220,000 cash purchase (market value 300,000)

Cash out to 100% of 300k immediately after purchase to obtain a loan of 300,000 @ 4.5% 30 year fixed payment = $1520.06 + 275 taxes/ins total home payment would be $ 1795.06

Reinvest the 300,000 with a cash on cash return of 10% for $ 2500 monthly cash flow.

$2500 - $1795.06 = $704.94 cash flow towards other living expenses

The above scenario shows how an additional 80k of "money," was essentially printed by buying right, being able to obtain property below market, and utilizing a benefit available to veterans.

The scenario assumes the veteran already had 220k cash plus associated closing costs and the property conforms to VA standards. In the event the veteran did not have the 220k they could still have purchased the property with 100% financing and still "net," proceeds of 80k using no cost purchase and refinances (rebate through the rate to pay all non reoccurring closing costs + prepaid interest/tax).



Comments (11)

  1. Hi John, There is no time requirement for the seller to sell to a VA buyer, but there is a 24 month chain of title report requested and a preliminary title report that is reviewed to make sure title is clear.


  2. Enjoyed your information. @Albert, is there any "seasoning" requirement on the part of the seller to the vet? Does the seller have to own the property for a specific period of time?


  3. You can use the above vehicles to build equity and cash flow it just depends on how much control, liquidity, use, tax advantages, and other benefits you're looking to achieve by putting your money in one place versus the other.


  4. Of some of the equity into passive vehicles such as reits,index funds as a way to build networth and cashflow? Thanks again Albert!


  5. Hope you are well Albert. I am a vet and recently received my certificate of eligibility from the VA and am in the process of searching for my primary but am also determined to fund my first REI deal with the cash out refi. as part of my multifamily/sfr strategy. Currently educating myself,creating my business plan, and networking. Reading your article has made me even more aware of the importance of vocabulary and research. I was just wondering how you felt about the reinvestment


  6. Welcome Clinton, hope it helps. 10% of 300,000 (assuming you did a no cost refinance up to 100% of market value) is $30,000 annually which comes out to $2500 per month. This is an assumption you can make a cash on cash else where of atleast 10% (rentals, hard money lending, etc). Let me know if I can clarify further.


  7. Hello and thank you for the insightful post! Albert I was just wondering if you would elaborate on the "reinvestment of the 300,000 cash on cash return of 10% for $2500 monthly cash flow."More specifically how did you come up with $2500? Again thank you for sharing your knowledge,time and strategies.


  8. HI Kerry your welcome and thank you for your service! The VA program is one of my favorite, its unique, its a niche, and offers many advantages if used strategically with a good financial game plan.


  9. This is very interesting! Thanks for sharing the concept Albert!


  10. Hi Kenneth, yes they would give you market value and max cash out allowed by VA is 100% of market value (max 250k cash back), no title seasoning or wait period following a purchase. I put 90% up there and that is the general guideline for most banks however the VA does not have a specified block at 90% LTV. The good part about VA is unlike conventional financial there is no time period where you have to season such as the 12 month rule to use market value. Even conventional financing when you purchase with all cash you can only cash out to 70% or up to your total acquisition cost within the 6 months after the purchase (other rules apply). The downside with VA is its only for primary residence but a veteran who knows how to utilize the program correctly and plans to live there can do so while building networth and cash flow from the proceeds of this strategy if done prudently.


  11. Interesting concept - you would still need an appriasal and other loan closing costs when you did the re-finance . My only question is would they still give you full market value (in the example $300K) when you just bought for significantly less?