VA Loan on Multifamily Homes, but no income in Colorado......

12 Replies

Not sure if I am posting this in the right section, but here is my predicament. After doing some research on being a live in landlord I know I would like to purchase at least a triplex. I live in Colorado and have recently hit a road block. Since my ETS (in 2013) from the ARMY I have been going to school full-time. The problem is most lenders do not consider using your GI Bill as actual income because it is not stable income. Now the only extra added income I have is about a 40% disability. Which only accumulates to about 600 and some change a month. I know the loans operate on a case by case basis. I was told that you could use the income from other units while living in one and it would be counted. After speaking to a VA qualified lender I was told this income would not work since I do not actually own any property with current units. I would not plan on buying without inheriting tenants if it would help the situation. This would be my first home purchase starting my journey to real estate.

Questions:

Any one have a similar issue and idea on how you resolved it?

Should I speak with a agent, the bank, or lawyer on issues regarding paperwork? 

Any feedback would be greatly appreciated and thanks for you guys time.

Your VA qualified lender has let you down. The VA allows a multi-unit property to use the current rents as long as you get a rental market survey with the appraisal that shows you're getting market rents. Then you'll get credit for 75% of the gross rents for vacancy, etc. As long as you show copies of rental agreements, you'll be fine.

On you GI bill, it's correct that you can't necessarily use that as stable income. you can use the $600 a month disability income though combined with the current rents on the property you're interested in buying. it's not much, but better than nothing.

Thanks for the reply and I see what your saying Don't come unprepared.  Now is it better to find someone that would be more equipped at getting that leg work done. Then go to a lender with all the paperwork after finding the area of choice. Or should I handle all this myself?

You should get qualified on your current disability income and down-payment reserves now. Then just know that when you find a property, 75% of the rents can be used toward expenses. You find your properties  and areas that hopefully add to the income your can use. The banker/broker will take care of the rest.

Sounds reasonable. It certainly wont be much but worth a shot. Thanks again that helps alot.

Thank you for this thread - I learned some good info that can help me out.

Mike

Medium erm logoMichael Roy MBA, EastRoy Management, LLC

Your lender may be partially correct, but keep in mind different lenders have different guidelines. As per VA guidelines, you may use 75% of projected income for units you will not be occupying. Many lenders however, may still put restrictions on this, for example, that you must have 6 months PITI reserves if utilizing that projected income. Many also stipulate that for DUPLEXES, no prior management/rental ownership history is necessary, while for 3-4 unit purchases, it is.

A duplex is a good place to start building that management history anyway, which will aid you in future financing on multi-families as well. I got started with my VA loan years back on a duplex, and have since used it again on several other properties. As long as you buy right, even a duplex can provide great returns, especially considering 0 down!

Your GI bill income will almost always not be allowed to be used, as it is not expected to continue for the foreseeable future (but I have seen a deal in which it was used- probably because of poor underwriting in my opinion). Disability however, may be used.

Good luck!

Originally posted by @Jed Bratt :

Your lender may be partially correct, but keep in mind different lenders have different guidelines. As per VA guidelines, you may use 75% of projected income for units you will not be occupying. Many lenders however, may still put restrictions on this, for example, that you must have 6 months PITI reserves if utilizing that projected income. Many also stipulate that for DUPLEXES, no prior management/rental ownership history is necessary, while for 3-4 unit purchases, it is.

A duplex is a good place to start building that management history anyway, which will aid you in future financing on multi-families as well. I got started with my VA loan years back on a duplex, and have since used it again on several other properties. As long as you buy right, even a duplex can provide great returns, especially considering 0 down!

Your GI bill income will almost always not be allowed to be used, as it is not expected to continue for the foreseeable future (but I have seen a deal in which it was used- probably because of poor underwriting in my opinion). Disability however, may be used.

Good luck!

Thanks for the feedback. I might have been aiming to high with a quad, but a duples would be fine as well. Just to get started and get used to the trade.  Thats why I am here to learn and so far I have picked up some good tips.

Thank you for your service and good luck with your real estate investing.

Originally posted by @Bob B. :

Thank you for your service and good luck with your real estate investing.

 Thanks alot more to learn, but slowly absorbing it all. 

Originally posted by @Bob B. :

Thank you for your service and good luck with your real estate investing.

 Thanks alot more to learn, but slowly absorbing it all. 

I could help you use tents right away your prior lender was probably a Freddie Mac based lender in which they required you to have landlord experience from other properties before they would allow you use rental income.

The thing is though, even if you were allowed to use rental income it's different when you use rental income on a subject property it's different or how its calculated is different. 

Medium new american funding logo  Albert Bui, New American Funding | [email protected] | 949‑514‑5106 | http://albertbui.com | CA Lender # 345453, WA Lender # 345453, TX Lender # 345453, TN Lender # 345453

Working on financing a special property and could use some advice myself... The property in question has a main house that I would be occupying and 3 rental units, a duplex and a sfr, in front on 8 acres. The total current rental income from the long term renters under fresh 1 year leases is greater than even the worst case scenario mortgage payment. I am wondering if this can be considered a quad purchase in that it has 4 units on the property and I would be occupying one. Anyone have any lead on an investor friendly va lender?