I'm considering buying a a multi-family unit for my residence (via HML) and using the BRRRR method. If possible, I'd like to later refinance with a VA loan. Would this make any financial sense? Has anyone ever successfully executed this strategy? If so, please share your experiences (positive and negative)
This is a great question Will, and I'm all over it. First and absolutely most important to me, Thank You for your service, Thank You. I'm Vietnam from 1965 and would do it again if I could move.
Okay, 1st I assume your referring to a (HML) hard money loan. Please don't consider that unless your positive it'll work. I recommend finding your property at 60/70% of ARV ( after repair value). Then find a private money loan on BP (biggerpockets). At 60/70 % you'll absolutely find the loan there.
Being as involved with the VA as I am and knowing what they allow you'll have no trouble converting to a VA loan (after completion). In this situation you have the ball in your park. You also could use an FHA (federal housing administration) loan at 3.5% which will wrap the rehab into the loan. Use the calculators to be sure you end up living free and possibly get 300-500 positive cash flow. I know this is tight but worst or best case your living free and your property value goes up and your tenants pay your loan.
Will, I hope that this helps a little.
@Ken B. Many thanks for your service! Military service has changed quite a bit since 'Nam. This helps tremendously! The private money lender is my first choice and is what I meant to say. (HML should probably be a last resort).
Thank You Will, Really if you get the right numbers a private loan is where you want to be. Also if you BRRRR a SFR and you say find a 2/1 thats at least 1100 sf turn it into a 3/2 and add 25k to your ARV and now you get your investment back plus an extra. 4 or 5 investments like that and now you have cash to purchase and no more loans.
Does the VA have a 75% LTV cap on a refi, or are they higher?