VA loan investing with 7 KIDS!

[Tanner Sherman]

Thanks in advance for clicking this far, as I greatly appreciate your insight no matter your skill level or experience. 
Here's my story:

My wife and I have 6 kids with one more expected in September. I am Active Army but I bartend and plow snow on the side and she is a hustler jack of many many trades, doing whatever she can to make money to include bartending at many different places at a time, insurance sales, and even recently medical coding. We are not 1 job the rest of our lives type people which is why real estate piqued our interest. We currently live in Minnesota where we unfortunately rent, but are scheduled to move to Nebraska in the next few months where we have been preapproved to buy our first house. We have since been hooked on biggerpockets and now are looking to invest in real estate. We understand that househacking is the best foot-in-the-door to the industry, but we have a lot of trouble finding a duplex with 5 br 3 bath on one side for under our preapproved $350k. We agree that we do not want to invest in the inner cities which is within our budget of between zero and still paying off debt, because we don't want to become slumlords and believe that we can better society by fixing up sad properties and making something beautiful out of them. I know that I can take out a second VA loan but I am very uneducated to the process of doing this. I have a coworker who bankrupted from real estate investing and he bashes the entire idea of the VA loan "because of the fees involved it is unreasonable for a service member who moves all the time".

I am simply looking to connect with other investors, veterans, big families and anyone willing to provide guidance as I am a sponge trying to absorb any and every piece of knowledge I can before we make our first investment. (And yes Brandon I know I can't read every book and even if I could I wouldn't learn as much as by actually doing it). We would love to work with our hands and fix it up ourselves, work with partners, learn how to utilize hard money and BRRRRs, but at this time we just want to make a safe smart decision to dip our feet in. 

Do we buy ourselves a $250k-$350k primary residence and try to get another loan to invest at the cost of a high interest secondary residence? 

Thanks again!

[Jeff Copeland]

You can only take out a second VA loan for a second primary residence. For example, if you buy a primary residence at duty station #1, live in it for a couple of years, and then rent it out when you transfer...You could then buy a second primary residence at duty station #2 with your remaining VA eligibility (which will be reduced by the amount used to guarantee house #1, and comes with a ton of red tape). 

The biggest risk of using a VA loan with no money down is over-leveraging. I've seen veterans get 100% financing, and roll their VA funding fee into their mortgage, which leaves them leveraged at like 104% LTV. That's great if real estate prices are increasing at 10% per year. But what happens if the real estate market contracts by 15%, and then you get orders to your next duty station? You're upside down on house #1, and may not be able to rent it or sell it and cover your mortgage. 

Compare this to a conventional loan where you put 20% down: Looking at the same 15% drop in value, you're fine. You still have equity in the house (because you put 20% down in the first place), and (worst case) you can still sell it and walk away without going into foreclosure.

You're right that there are very few duplexes with 5 bedrooms. I can't help you there. 

But as a fellow veteran, I urge you to be very careful with 100% VA financing - There is a lot of uncertainty in the economy and the real estate market right now, and you don't want to be left holding the bag if prices drop.