Househacking as a Veteran is very lucrative in today's market - great rates, no PMI

[Alan Asriants]

I just wanted to share this as a PSA for anyone thinking about purchasing an investment property and is a Veteran. I have a few clients who are veterans and are taking advantage of the VA loan. The VA loan is one of my favorite loan programs because it offers incredibly competitive rates and no PMI with 100% financing.

I have some clients locking in rates in the low 5's. 

Just for comparison sake here is a breakdown of what rates look like with VA loan compared to conventional loan programs:

While not everyone can qualify since they are not a veteran, if you are however, a veteran and consider buying a house, consider househacking! 

You are saving close to $250/m on a 400k property while putting $0 money down on a property. (This includes the VA funding fee!!) Not only does this give you more opportunity to cash flow compared to the competition for the same house, but it also gives you better returns. For example when calculating cash on cash on a 400k home and comparing 0% Down VA scenario below vs 5% Down Conventional here is the benefit when calculating cash on cash:

400k Home with VA loan your payment is 2209/m and with Conventional your payment is 2490 a delta of 234/m.

Assuming that insurance and taxes are the same totaling another 800/m

Now your total payments are $3056/m for VA and $3290/m for Conventional

Your closing costs are the same: we will use 5% for simplicity which totals to 20k

For simplicity again, we will assume property is turnkey and needs 0 rehab for our gross CoC calculations

For 5% you need another 20k for down payment putting your all in costs for the Conventional Scenario at: $3290/m with 40k all in

The VA Scenario since we are putting 0% down is $3056/m with 20k all in

Assuming rent is 3600/m - lets just say its a duplex with each unit rented at 1800/m, your gross cash flow for each scenario is:

VA: $544/m

Conventional: $310/m

Calculation CoC;

VA: $544*12 = 6529 Annual Cash flow, Then divided by all in cost: 20k - 6529/20000 *100% = 32.64% Gross CoC 

Conventional: $310*12 = $3720 Annual Cash flow, Then divided by all in cost: 40k - 3720/40000 *100% = 9.3% Gross CoC 

Thats a 351% increase in CoC return in comparison to Conventional!

So if you are a veteran thinking about buying your home and getting into RE investing, consider Househacking!

THESE NUMBERS ARE ESTIMATED AND DO NOT REPRESENT ACTUAL MARKET DATA. THEY ARE MEANT TO BE USED AS DEMONSTRATIVE, ALSO THEY ARE RUN IN THE SCENARIO WHEN YOU MOVE OUT AND FULL RENT THE BUILDING AFTER ALL CONVENTIONAL/FHA/VA GUIDELINES ARE MET.

Loan Type	Down Payment	Rate	PMI	Est. Monthly Payment
VA Loan	0%	5.25%	None	≈ $2,256
FHA Loan	3.5%	5.95%	Built-in (≈0.55%)	≈ $2,479
Conventional Loan	5%	6.25%	$150/month	≈ $2,490