I have been jumping around in the Colorado Springs real estate market, looking at both single-family and multi-family homes to begin my real estate career. However, since I am not married, the military does not pay me enough money to buy any homes in the area. The only places I can afford are townhomes, condos, and apartments. None of these options are what I initially had in mind to begin investing in real estate. However, I am not wholly imposed on investing in any of these types of properties. Ideally, I would like to buy a home. Unfortunately, the only options I can think of to bring more income to the table are finding a potential co-borrower or finding a second job, a "side hustle," or a job I can work on the weekends. What other options are there to increase the amount of approval money on the VA loan? Would considering purchasing in a cheaper market be a good idea? I always hear people saying, "I wish I would have started investing in real estate earlier," so I am trying to find the path of investment that provides the least resistance. Not necessarily to make money quick, I feel it is crucial for me to at least get my foot in the door of real estate investing.
I just found your post on the forums and wanted to chime in as I'm not sure what kind of guidance you've received yet. First and foremost, thank you for your service to our country!
I'm not sure if you've completed a loan application with a lender yet, but one of the things we look at with your pre-approval on a VA loan is your residual income (not just your debt-to-income ratio). Essentially, after paying the mortgage payment, all of your consumer debt payments, maintenance on the home, state/federal taxes, etc. we want to see how much money you have leftover each month to pay for living expenses. If it's just you in the home, you'll need at least $491 leftover after all these expenses. Don't worry, you don't need to know how to calculate all of this, but the point of this is to show you that VA has a different way of calculating your income than other types of financing options.
It sounds like you're active duty? If that's the case, we can use your BAH pay on your LES in addition to your regular pay to help you qualify. Again, you would need to submit a loan application to see how much you can qualify for based on the VA residual income calculation.
One area where I see a lot of first time home buyers get stuck, is they want to buy their "forever home" on their first home purchase. In real estate, it doesn't always work this way. You should see your first home acquisition as a stepping stone towards creating long-term wealth, and eventually moving up in price as time goes on. With homes appreciating at an average rate of 8%-10% over the past decade in Colorado Springs, a $200,000 home today will be worth about $220,000 this time next year. After about 3 years, that same house would be worth around $260K. Assuming you took out a $200K loan when you bought, that same loan would be paid down to around $187K leaving you with about $79K in equity after about 3 years. After you pay closing costs from a sale, you would net around $60K which could be used to fund a down payment on the next house, or to even tackle some consumer debts and improve your cash-flow position. You should view the home purchase today as a place to start building equity towards a future acquisition down the line.
The best time to buy a house was 10 years ago, but the next best time to buy is right now. The sooner you get started in real estate, the sooner you can start building wealth for your future.
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Real Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
4y
@Brock Fica I work with house hackers in the springs and have done 3 myself. If you get a duplex, you can often use the rent from the other unit to count towards "income" and help you qualify for more house.
Another idea is to geta co-signer on your loan. Then when you make more money you could refinance and take them off (only if you wanted to). Side hustle probably wouldn't help too much unless it was a w-2. You have to show two years of income with a side hustle, new business or 1099 income to use that to qualify.
Great mindset with getting started and not trying to get rich quick.
