Own 2 properties. VA loan maxed. Little savings. How to buy more?

Question

Hello everyone!

Ok so I currently own 2 Homes financed through VA loans. One in Grovetown GA which is entirely covered by a tenant for the last 4 years, and one I'm living in in Ewa Beach Hawaii. I just closed on the current house this past August but I have discovered that I will be heading to another Duty station this August.

The house in Georgia is worth $170k and I owe $155k on it. I've already refinanced it back in 2012. The house here in Hawaii is worth $595k and is projected to appreciate $30k this year. I see this property going up $100-150k in 3-5 years.

I know that I want to buy another property when I move. What are my options? Should I wait a few years and look into a home equity loan? Should I look at selling the Hawaii property closer to maturation? I'm trying to establish $10k in residual income by or shortly after retirement which is 12 years. I know it's a lofty goal but I'm just aiming high. Any insight?

James Jones · Answer

@Chris Mason what are the normal costs for refinancing to a conventional loan? This might be smart so that I can restore the VA, but will I need a down payment or to cover closing costs?

@Kevin Hunter my mortgage is $2800 and rent is about $3k here. But that doesn't include maintenance fees and HOA. I will probably have to eat a few hundred a month. But it look like this property is going to appreciate by 30k this year and I think it'll go up for a while. What do you think?

Chris Mason · Answer

You pay all the VA mortgages off, and either fill out online, or mail in, a form requesting a one-time restoration of entitlement even though you still own the home(s) that were originally purchased or refinance with a VA mortgage, based on you having paid those mortgages off (...via a refinance that wasn't a VA loan).

Note that the Department of Veterans Affairs, and all eight zillion employees, are entirely and completely unaware that it's even possible to refinance a VA loan using a non-VA loan, and they also aren't aware that veterans don't ONLY get VA loans, so you REALLY have to read in between the lines to understand that if you take out a $200k Fannie Mae loan, and use the proceeds to pay off a VA loan with a $200k balance in full, you've paid off the VA loan while still retaining ownership of the property or properties.

If you call them on the phone and tell them that, they simply will not comprehend it, and will say something stupid because they simply cannot process that a veteran is getting a mortgage that isn't a VA loan.

Relevant link. Note questions 12A and 13A, where the VA people implicitly think that you can only use a VA IRRRL loan, or a VA cash out refinance loan, to refinance a VA loan. Only on page 2 paragraph C, second to last sentence, in teeny tiny print, do you have any hint at all that ANYONE at the ENTIRE Department of Veterans Affairs understands that you do not need to refinance a VA loan, using a VA loan. Obviously the rage of several frustrating phone calls and ten thousand burning suns is between the lines in this post, please forgive. :)

Brent Coombs · Answer

Someone mentioned on another thread that you CANNOT restore any of your VA entitlements by just refinancing out of the loan, but rather, you would need to SELL the property in order for the entitlement to be restored! Confirm? If true, that may make a decision easier to arrive at! Cheers...

Chris Mason · Answer

Hi @James Jones,

Most obvious answer is to refinance one or both out of the VA loans into conventional financing, in order to restore part or all of your VA entitlement. Obviously the rates on those refinances are going to be higher because nothing on this planet can touch a VA loan in that regard, but if your goal is 0% down, that'll to do it.

Leoan Concepcion · Answer

Aloha James,

Congrats on the orders. I too live in Ewa Beach, and I am planning to sell my property there next month to get a bigger place since our kids are out growing our current place. I would say a lot will depend on the cash flow of both properties and the rental markets. I would not recommend owning a property that would leave you a negative cash flow if you rent it. Especially in Ewa beach where association dues and taxes rise quite a bit every year. Having a VA loan financed property can be a blessing, but also a curse since your monthly payments will be higher due to having no down payments to keep the balance and payments lower. Please let me know if you will be selling your property since we are looking for a bigger place to buy in the same area. Please PM me if your interested or want to hang out and talk real estate. I wish you luck in your business and your career.

Kevin Hunter · Answer

@James Jones, those numbers are pretty tight.  So if you look at this as investment, this is what it looks like

Mortgage: 2800 (I assume this is principal, interest, tax, insurance)

Rents: 3000

Repairs: 300

CAPEX: 300

PM: 300

HOA: 150 (?? you will have to update this part)

Total CashFlow: -$1050

Monthly Loss: $1050, Annual Loss: 12,600

In my opinion, that is an awfully big gamble on appreciation, something I don't ever do, but you just have to weigh whether or not you think it is worth it.  Of course, the second order effect of that is that you have almost 600K of VA mortgage entitlements tied up in that loan.

James Jones · Answer

Zero percent down on a $600k mortgage? Non VA? I'm going to check this out! I'm assuming the interest rate is going to skyrocket but it intrigues me. Thanks!

Daniel Thompson · Answer

Sorry if my answer is a repeat, but I have two options that come to mind. Either you get the VA certificate released from one of your properties.... Or go to Navy Federal Credit Union and qualify for one of their zero down loans. It follows the VA loan very closely. Last time I checked the difference was the funding fee and % rate. VA will have a lower % but a higher funding fee. NFCU will have a higher % but lower funding fee. They gotta make money too. When I joined I was active duty and they only required me to put $5 in the account. OH and when I last looked into it your immediate family can use the loan as well... as long as you qualify. Hope that helps.

Chris Mason · Answer

Most people refinancing roll closing costs into the loan, assuming the appraised value will support it.

James Jones · Answer

Thank you all so much for your help! So what I'm gathering is the best option is to get my mortgage as low as possible and hold the property? Are there any options that dont require payment of any closing costs, and is it even worth it because I'm sure it would require points or an increased interest rate. I would really prefer to sell, but it doesn't seem like there is an option that doesn't result in a significant loss of money.

Own 2 properties. VA loan maxed. Little savings. How to buy more?

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