Buying first multi-family property with VA loan
Member since 2018 · 13 posts · 6 votes
Hello BP members!
My brother qualifies for the coveted VA loan and we've learned that he can purchase up to a 4-plex as long as he occupies one of the units for 6 months. Does anyone have any experience with this, and is this really his best option to get started, with our goal being cashflow friendly?
We are also having difficulty finding good deals. We've been searching on Trulia, Zillow and Loopnet. But does anyone have any contacts they can refer to investors just getting started? Thank you so much.
Hello BP members!
My brother qualifies for the coveted VA loan and we've learned that he can purchase up to a 4-plex as long as he occupies one of the units for 6 months. Does anyone have any experience with this, and is this really his best option to get started, with our goal being cashflow friendly?
We are also having difficulty finding good deals. We've been searching on Trulia, Zillow and Loopnet. But does anyone have any contacts they can refer to investors just getting started? Thank you so much.
Here's a VA 2-4 unit braindump I did like a year ago that might be helpful. Good luck!
Hello BP members!
My brother qualifies for the coveted VA loan and we've learned that he can purchase up to a 4-plex as long as he occupies one of the units for 6 months. Does anyone have any experience with this, and is this really his best option to get started, with our goal being cashflow friendly?
We are also having difficulty finding good deals. We've been searching on Trulia, Zillow and Loopnet. But does anyone have any contacts they can refer to investors just getting started? Thank you so much.
I believe they expect this to be an owner occupied property for at least 12 months. PM me if you have additional questions
Best of luck and thank your brother for his service.
Stephanie
I would say hands down the VA loan is the best route to take if you have the ability too. Especially since you can do a 4-plex, live in one with only 3.5% down (or something crazy) and NOT have Mortgage Insurance. I have done both of my previous 'house hacks' with my VA and specifically saving it, now that I cashed out of those last two, for a 4-plex when I find an area I want to invest in.
The only real downside is VA loan requires a slightly higher level of inspection before closing. And that can be a problem with older houses that do not have 100% up to code with newer builds. I know I passed on a house that would have required a new breaker box for electrical due to this.
Mortgage Insurance would have killed any cash flow that I might have made, but with the VA I was able to make a little profit.
As for finding a 4-plex, well you are on your own there. I have not seen any 'good' public resources for finding a 2+ plex. I know Loopnet is known as the place commercial properties go to die, but you might be able to reach out to a broker that is listing a property on there and see if they have anything. That is a tip I heard on a podcast.
Thank you to Stephanie and Michael for their awesome input!
@Michael Randle, just wanted to ask regarding Stephanie's advice, how long does my brother need to owner-occupy the property before he can claim it as a rental property/sell it? Is it 6 months, 12 months, or something different?
Also, since you've done it with both of your previous house hacks, how long was it before you could start investing in another property? Much appreciated!
My understanding is as follows. When you sign the paperwork the VA expects you to be in the property for 12 months.
Now there is exception to this if your brother has to move for work. I was in my first VA home for about 9 months, moved for work and got a second VA loan in the new location while keeping the old VA loan. This also applies to selling the home. But anything under 2 years you run into tax issues with capital gains so you need to look out for that.
Now I am slightly confused by what you mean by 'claim it as a rental property'. If it is a 4-plex by its very nature at least 75% of the property is a rental property. And this will be reflected on his end of year tax returns. (or should be)
If you are talking about DTI ratio and the ability to apply for another loan. That really depends on the mortgage company you use. Usually it is 1 full year of rental income on your end of year tax returns.
I think you are referring to how long you have to wait before using the VA loan to get another property. In that case after 12 months you can change the VA over to a conventional loan, this leaves you clear to then take your full VA loan benefits and get another 4-plex (only if you Owner/Occupy). Again there are exceptions like moving for work or selling your original VA loan early. But generally it is 1 year at a time.
Remember the general rule is 1 VA loan at a time, so you will have to switch your original VA loan over to something else in the event you want to use your VA loan again for a new property. Again there are exceptions with the number of properties you can have, but not the amount of VA loans you can have out at one time.
For instance in Aurora CO I can have up to $529k in single family loan. So lets say I have a $350k loan in Aurora. And then I have to move to Mono CA that has the same $529k cap. I can only qualify for $179k in Mono CA for a second single family home VA loan. At least this is what happened to me personally when I went CO -> AZ -> CO with less then a 12 month downtime between the moves.
Hello Jerniel, thank your family's service.
This is a very smart move on your part. The last VA deal we did was with a buyer who used USAA. They did a great job.
As far as finding a deal... Real Estate is very local. A lot of markets have companies that specialize in investment properties.
What area are you looking in?
Hello BP members!
My brother qualifies for the coveted VA loan and we've learned that he can purchase up to a 4-plex as long as he occupies one of the units for 6 months. Does anyone have any experience with this, and is this really his best option to get started, with our goal being cashflow friendly?
We are also having difficulty finding good deals. We've been searching on Trulia, Zillow and Loopnet. But does anyone have any contacts they can refer to investors just getting started? Thank you so much.
Here's a VA 2-4 unit braindump I did like a year ago that might be helpful. Good luck!
I have experience with this, being a Navy Veteran. If he wants to build a real estate portfolio....what I recommend is he get an FHA Loan FIRST. Househack a duplex/triplex/fourplex. Live in it for a year.....and THEN move out of it, and rent out the unit you had been occupying. THEN utilize the VA Loan and move into it and live in it for a year....
FHA will NOT loan to you if you already own property within 100 miles so utilize an FHA Loan first.
2 or 3 years later you may be able to refi or restructure the FHA Loan to get rid of the PMI if you get enough equity in it as well.
@Michael Randle Thank you so much for breaking it down and giving great examples of how the VA loan could be used
@Aly Vizcarra Thank you for the info! Right now we're looking in Jacksonville, Fl but pretty much open to anywhere. We're just getting into it so still have to focus in on a market.
@Chris Mason Thank you! This was EXTREMELY helpful and answered so many questions I had and more. And since you're from the Bay Area, we might consider getting a loan through you in the future.
@Brian Garlington Great advice Brian, appreciate it very much.
I got really excited after learning all this, and then I brought the idea up to my brother. He was gung ho until he got to the part about owner-occupancy. He said he was unwilling to move to some place by himself for a year (and we live in the Bay Area and everything around here is totally out of our range). So that made me start researching the minimum requirements for owner-occupancy and penalties like mortgage fraud. It seems like I may have hit a brick wall if my brother is unwilling to physically move to the unit. Does anyone know if there's a work around on this? We definitely don't want to do anything against the law.
@Michael Randle Thank you so much for breaking it down and giving great examples of how the VA loan could be used
@Aly Vizcarra Thank you for the info! Right now we're looking in Jacksonville, Fl but pretty much open to anywhere. We're just getting into it so still have to focus in on a market.
@Chris Mason Thank you! This was EXTREMELY helpful and answered so many questions I had and more. And since you're from the Bay Area, we might consider getting a loan through you in the future.
@Brian Garlington Great advice Brian, appreciate it very much.
I got really excited after learning all this, and then I brought the idea up to my brother. He was gung ho until he got to the part about owner-occupancy. He said he was unwilling to move to some place by himself for a year (and we live in the Bay Area and everything around here is totally out of our range). So that made me start researching the minimum requirements for owner-occupancy and penalties like mortgage fraud. It seems like I may have hit a brick wall if my brother is unwilling to physically move to the unit. Does anyone know if there's a work around on this? We definitely don't want to do anything against the law.
There is no work around for occupancy. He must live in the subject property for either FHA or VA.
@Jerniel Diaz Dude there's no "work around" on this. Whoever is on the VA Loan or FHA Loan. has to move in to the place and live there at least a year. If you and/or your brother don't want to do that then come up with the 25% and buy it as a non owner occupied duplex/triplex......If you don't have the money.....then someone has to "sacrifice" and move somewhere for a year. Keep it simple man, keep it simple.