Investor · Santa Ana, CA · Member since 2019 · 35 posts · 2 votes
Hi BP Forum,
I'm a novice when it comes to REI and wondering if you guys can help me with my situation. I'm looking to refinance my VA loan with a conventional loan.
Currently, my home has about 170K in equity and I want to take out my VA loan using a conventional loan. The reason is so i can have my VA loan to purchase my next property. I want to prep my self for Real Estate Investing and wondering if i should refinance for the same amount of money I owe on my property; or take out some of my equity to have on the side and use that money to invest in real estate?
Anyone out there have any input on what would be the best strategy in using my situation?
Quick recap:
First: If I refinance I would have my VA loan with a conventional loan. I'll have my VA loan available to purchase a new home with little or no money down.
Second: If I take equity money out I'll have cash available to purchase more properties.
Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
6y
Everyone has different goals. If you live in an area where property appreciates in value it may make sense to refi into a conventional and buy another property with your new va loan and move into that. Keep doing that every 2 or 3 years or as long as your spouse I’ll let you 😉. THEN every 2 or 3 years you can look at taking cash out of a “previous” property to buy properties in a less expensive area, like the Midwest.... use those Midwest properties for cashflow.
Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
6y
Everyone has different goals. If you live in an area where property appreciates in value it may make sense to refi into a conventional and buy another property with your new va loan and move into that. Keep doing that every 2 or 3 years or as long as your spouse I’ll let you 😉. THEN every 2 or 3 years you can look at taking cash out of a “previous” property to buy properties in a less expensive area, like the Midwest.... use those Midwest properties for cashflow.
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
6y
Refinancing costs money in origination fees, points, closing costs, etc. You already have the VA loan, why not just leave it be and save up so you can get your next property with a conventional loan?
Also, it's possible to have more than one VA loan at a time. (criteria needs to be met)
Medford Oregon · Member since 2019 · 85 posts · 65 votes
6y
VA loan limit is 484K or so right now. That can be over more that one property. there is a 1 time reinstatement of eligibility if you want to keep your current property, refi out of the VA loan, and use the VA benny for another property. If the place you have now makes sense as a rental then go for it. if not, you may be better off selling the property and using the VA loan elsewhere. a perfect situation would be house hack a 4 unit for a year, then use the 1 time reinstatement to get into another 4 unit for another year, if number of doors is your goal. figure on using conventional financing after that. If you have service connected disabilities you can get the funding fees waved.
Everyone has different goals. If you live in an area where property appreciates in value it may make sense to refi into a conventional and buy another property with your new va loan and move into that. Keep doing that every 2 or 3 years or as long as your spouse I’ll let you 😉. THEN every 2 or 3 years you can look at taking cash out of a “previous” property to buy properties in a less expensive area, like the Midwest.... use those Midwest properties for cashflow.
Repeat.
I am looking to rent my current property and get a bigger place for my family. So this strategy could work for us and I've heard of people with VA loans doing this type of strategy. I just want to get some more in-depth details on how to proceed and take the leap. I think I can convince my wife to do this at least 2 or 3 times to get some properties under my belt and start getting building cash flow.
How do you find out what markets are good markets to invest? Second, what markets in the Midwest are good right now?
Refinancing costs money in origination fees, points, closing costs, etc. You already have the VA loan, why not just leave it be and save up so you can get your next property with a conventional loan?
Also, it's possible to have more than one VA loan at a time. (criteria needs to be met)
I did not even think about the refinancing cost, points and closing costs. Thank you for bring it up.
At the moment I don't have a down payment, because I'm paying off all my debt and I figure by refinancing and having my VA loan out and ready to use. I'll be getting a head start and preparing myselft to jump on great deals.
I also, did not know i could use my VA loan on multiple properties. I will definitely do my research on using my VA loan more than once at a time. Do you have any resources on the topic or anything that can help me?
VA loan limit is 484K or so right now. That can be over more that one property. there is a 1 time reinstatement of eligibility if you want to keep your current property, refi out of the VA loan, and use the VA benny for another property. If the place you have now makes sense as a rental then go for it. if not, you may be better off selling the property and using the VA loan elsewhere. a perfect situation would be house hack a 4 unit for a year, then use the 1 time reinstatement to get into another 4 unit for another year, if number of doors is your goal. figure on using conventional financing after that. If you have service connected disabilities you can get the funding fees waved.
I recently heard that the 484K was going to be increase in January 2020, but I don't know by how much. And like I mention before I did not know I could use it on multiple properties.
My current property doesn't seem that it will cash flow pretty good right now. I'm in southern CA and you know how the market is right now. I haven't ran the numbers or done enough research to get the real numbers, but it is on my to do list to get some real world practice and experience.
My goal as a first deal is to get a multi family home. I would definitely house hack if possible, just to get the ball rolling!
Seems like you know a lot about VA home loans. Do you have resources that you can share?
Medford Oregon · Member since 2019 · 85 posts · 65 votes
6y
I am not a pro by any means but have experience with VA loans. I purchased my home with a VA and recently did a cash out refi, again with a VA loan. I was able to borrow 100% of the appraised value. Keep in mind I could end up upside down on my loan to value if housing prices fall. I am using to money for a down payment and reserves on my first rental. I also lowered the interest to 3.375%. The one thing I failed to account for initially was closing costs, which were around $5k. I restarted my loan so I'm paying for the interest that's front loaded and the money is only making 2% in savings while I shop so there is a cost to this method. I spent hours reading articles and running searches about VA loans and learned quite a bit. Time will tell if this is a good idea or not.
The occupancy rule applies so you have to live in the property purchased at least a year. I believe the only exception is relocation due to work or service. You can refi out of your VA but you would have to apply for reinstatement of eligibility. You can do that once. I could have just move to another place but prices are too high for me to purchase 2 SFRs with $484k.On my loan there was a $5k ish funding fee. That is waived if you have service connected disability but I dont recall the percentage. It's even refundable if you were charged the fee and the date of your disability is prior to the loan closing.