Rental Property Investor · El Paso, TX · Member since 2020 · 4 posts · 0 votes
My wife and I purchased a single family home just 2 weeks ago. We bought our home for its value and received no equity. Also, we're in the military, so the VA Loan gave us 0% down. My question is, how can we utilize our current property to help finance a second property? We want to up the game and house hack a multi family property.
Rental Property Investor · Dayton, OH · Member since 2019 · 293 posts · 440 votes
6y
@Brann Perz it does not sound like you are going to be able to use your current property to get financing for investment. If you qualify and can rent it out then you would be building your equity on that one.
There are two options which one has already been stated by paying down your loan etc.
The second is looking for another option for your property if there is one. Does it have multiple lots you could sub-divide? Can it be converted to a duplex? Is there anything quirky about zoning that would allow you to get a higher better use?
Lender · Frisco, TX · Member since 2019 · 546 posts · 270 votes
6y
Hi Brann. As far as utilizing equity in your current property goes to purchase a new property, that can be a little tricky. The first thing you would need to do it wait for your current property to both appreciate in value and pay down the current mortgage so you can take out more money in a cash out refinance or get a lot of cash when you go to sell your current property to buy a multi.
You realize that since you purchased 0% down recently, you have no equity in your current home. When you PCS, if you have eligiblity left you should be able to purchase your "next primary residence" with that --- double check with a good lender.
If you obtained a renter, that might help. But, you need to be able to qualify for your next loan, etc. Remember, lenders will use 75% of the rental income (not your rental profit/loss) when calculating your ability to service the debt for your enxt loan. For example, if the rent is $1000 / mo and your expenses are $750 a month, you actually have a net ZERO in helping you qualify for another loan.
On the surface, if you have $1000 incoming rent and $750 expenses, you should be netting $250 a month. But, but because the lender will calculate on 75% of your rental income, it becomes $750 of incoming rent less your $750 expenses. So, in this example, your rental didn't actually help your cash flow on paper to qualify for larger loan.
Rental Property Investor · Dayton, OH · Member since 2019 · 293 posts · 440 votes
6y
@Brann Perz it does not sound like you are going to be able to use your current property to get financing for investment. If you qualify and can rent it out then you would be building your equity on that one.
There are two options which one has already been stated by paying down your loan etc.
The second is looking for another option for your property if there is one. Does it have multiple lots you could sub-divide? Can it be converted to a duplex? Is there anything quirky about zoning that would allow you to get a higher better use?