How can I redeploy the equity in my SFH rental bought with VA?

4 Replies

Looking for some advice or strategy on how I can I can redploy the equity in my VA loan rental.

Purchased in 2017 with 0% VA loan. Moved out a few years ago and it is a full on rental property. I owe about $428k at 2.25% in principal and if reappraised I believe it should come in around $600k based on recent sales.

Would a HELOC be a possible strategy? I'm not sure what the math would work out to be for how much I would be able to get. I'm admittedly under educated in that area.

I've considered selling but ultimately decided against it because it's cash flowing and in an area that I expect will continue to appreciate greatly in the coming years.

Been spinning my tires on REI and I really want to gain some traction and purchase more properties out of state, preferably in the south/Midwest.

Kevin, It's tough because your rate is really good on the first, however you do need to refinance that VA loan into a conventional loan to free up your VA entitlement. Should you go buy another home and want to use your full VA entitlement you would need to have that refinance or paid off. If you just refinance the home into a conventional loan you could free up the VA entitlement and take cash out at the same time (cash out refinance).

The rate will not be as low as the VA rate unless you buy down the rate. Based on inflated home prices it might make sense to utilize the equity to buy that rate down especially if that is a long term rental.

@Jason Wray when I moved from the first house, my girlfriend at the time (now wife) and I bought a primary with VA but down 20% so we could take advantage of the low rates. We refinanced both properties back in January and got 2.25% on both. We have a lot of equity in our primary from the down payment and of reappraised, a significant amount more due to the wild appreciation (San Diego).

Leveraging the equity in our primary is pretty much a no go as the wife does not want to expose primary to the risk. We may have enough cash in savings for a down payment on a modest purchase in the south so that's an option. However, I'd really like to reinvest the equity in our rental property instead of dipping into our savings.

Hi @Kevin Phu , it sounds like you still have the VA loan on the first property that is now being used as a rental, is that right? Have you listed the house you and your wife are living in as your primary for the new loan?

With VA loans it is possible to take 100% of the value even at the new assessed value. So, you may indeed be able to tap into the equity while keeping the VA on it. $172,000 would be enough cash to purchase a duplex in San Diego County and, as you've experienced, it's hard to beat the appreciation here.

Let me know if you'd like a good lender resource here in San Diego. My contact is doing one of these 100% VA refinances as we speak.

Originally posted by @Christina Labowicz :

Hi @Kevin Phu, it sounds like you still have the VA loan on the first property that is now being used as a rental, is that right? Have you listed the house you and your wife are living in as your primary for the new loan?

With VA loans it is possible to take 100% of the value even at the new assessed value. So, you may indeed be able to tap into the equity while keeping the VA on it. $172,000 would be enough cash to purchase a duplex in San Diego County and, as you've experienced, it's hard to beat the appreciation here.

Let me know if you'd like a good lender resource here in San Diego. My contact is doing one of these 100% VA refinances as we speak.

Property #1: Purchased on my own with 0% VA loan. House hacked for a few years then moved out and turned it into 100% rental. Still a VA loan marked as investment. Owe 428k; could reappraise for 600k.

Property #2: Purchased with my wife, who is on the loan, using VA again. We put 20% down because we had it and wanted a lower mortgage plus it put the loan under the jumbo loan numbers for a better rate. Owe 498k; could reappraise for 750k (conservatively). We don't to risk leveraging the equity in this home as it's our primary.

"With VA loans it is possible to take 100% of the value even at the new assessed value.". With property one as an example, are you saying it's possible that I refi property #1 as new assessed value (let's say 600k for example), which would give me 172k as a cash out? If that's the case, the mortgage will probably come close, if not completely wipe out the cash flow. 

Would love to connect and get some referrals from you! Thanks for the input.