VA loan rental property

16 Replies

I need some advice. I currently own a home in Louisiana, but I am transitioning out of the military and will be moving to Florida. This home was originally purchased with a VA home at $150k two years ago with zero down, and I've put about $10k in updates that I did my self. After discussing with my realtor, he is confident that the home will go for about $200k. So I am looking at my sweat equity paying off. I also looked into rental prices in the area and it looks like I could possibly make at around $500 a month on passive income. so I am torn as to what to do. sale or rent it out. I am a little worried on taking on this challenge from long distance. I am thinking sale, amd reinvest the money I make from it. I am already looking at multifamily homes that I can house hack when I move to Florida, specially on a VA 0%down and no property taxes. Any advice will be appreciated, as you can tell I am a noobie, and very motivated to get started. Thank you in advance.

I am a fellow veteran and my current house is also under a VA loan. You have to decide what you want to do with your current home. If you are gonna keep it to rent out I would refinance it under conventional terms and free up you VA obligation so you can use it again on your new home. I'm not sure how the VA loan would work for a multifamily because it is for a single family single unit benefit only.

Originally posted by @Russ Fry :

I am a fellow veteran and my current house is also under a VA loan. You have to decide what you want to do with your current home. If you are gonna keep it to rent out I would refinance it under conventional terms and free up you VA obligation so you can use it again on your new home. I'm not sure how the VA loan would work for a multifamily because it is for a single family single unit benefit only.

Incorrect. VA loans can be used to purchase up to a 4 unit multifamily. 1-4 units still fall under lending guidelines as "residential loans" versus "commercial loans."

@debra is correct. You can buy a single family, duplex, triplex or quadplex with a VA loan because they are considered residential units.

You can also use your VA loan multiple times. The VA will back a loans up to 424k in most areas. That price can increase based on the location you move to. So in your case you still have roughly 274k left that the VA will back (424-150=274)

To answer your origional question, i would sell. Use your va to purchase a quad and house hack. Use a portion of the 50k to put down on another MF within driving distance. Now you have two income producing assets within driving distance. Its not fun being an out of state owner unless youve built a solid team you can trust with your asset. 

Let me know if you have any other questions or need anything brother, im active duty Army and also an active investor. 

good to know I was told different. Goes to show that the people who are supposed to help you with your VA benefits you can't trust. Just like the VA hospitals.

just so I know do you have to reside in one of the units to use the VA loan for a mulitfamily?

@Russ Fry yes. VA Loan is meant to be for your primary residence so you must live in one of the units.

Additionally, you can't have a big fixer upper. The place must meet the 3 S's: Safe, Sanitary, Structurally sound. These are the Minimum Property Requirements (MPRs) a VA appraiser will ensure the property has. They can be fixed out of pocket but it must meet the MPRs prior to approval of financing.

I agree with @Dan Wynn . Especially first starting out, I would feel more comfortable being in close physical proximity to my units.

With regards to the VA Loan, does anyone know how many times you can use it after leaving the active duty? I currently own 1 home with my VA benefits and am looking at refinancing under a conventional loan eventually and using my VA eligibility again after I get out of the active service.

@Sean M. it's not how many times but how much. You have $36,000 dollars worth of benefits. When you request a certificate of eligibility (COE) from the VA (can be done through the ebenefits portal) it will tell you how much benefits you have left. The benefits available is the amount the VA is willing to pay the lender if you default.

Make sure you use a lender that is familiar with the VA loan and a realtor that is as well. You can find a Military Relocation Professional (MRP) certified realtor in your area online or another realtor could refer you. A MRP is certified as better understanding military service members and veterans needs as well as the loan benefits.

@Mike Del Angel

Thank You for your service. I'm a Navy Veteran myself and used the VA loan to purchase a duplex here in the Bay Area. I have a couple of other rentals as well.

You should give very strong consideration to refinancing out of the VA Loan to a conventional loan.

Go onto CraigsList, Rentometer and Zillow to get a real good idea of how much you could rent out your current property for.

Use your (now new) VA Loan to buy a 2-4 unit to HouseHack where you will be moving to.

Live in that property for 2 years.

Repeat.

Keep it simple my man and build that WEALTH.

Originally posted by @Brian Garlington :

@Mike Del Angel

Thank You for your service. I'm a Navy Veteran myself and used the VA loan to purchase a duplex here in the Bay Area. I have a couple of other rentals as well.

You should give very strong consideration to refinancing out of the VA Loan to a conventional loan.

Go onto CraigsList, Rentometer and Zillow to get a real good idea of how much you could rent out your current property for.

Use your (now new) VA Loan to buy a 2-4 unit to HouseHack where you will be moving to.

Live in that property for 2 years.

Repeat.

Keep it simple my man and build that WEALTH.

So I have a similar situation where I used a VA loan for current condo. I am looking to rent it out to purchase a duplex or something larger. My question is, how can I put this property under a LLC without having the mortgage recalled by the bank?

you put zero down and it cashflows $500 a month? are you calculating it as rent minus PITI

it's rare that a retail house, especially at that price can be profitable ESPECIALLY in a military town where market rents are mostly set by BAH. (polk???)

On top of that, it's even less likely you'll have  good return on equity.

I would sell and take your earnings, otherwise it's likely you'll have to subsidize out all the money you've made in a negative cash-flow deal.

post the numbers.

I was made aware of a great strategy that can be used by veterans by a fellow BP member. I can’t recall his name at the moment or else I would tag him but it went along the line of this.

Sell your home that is under the VA Loan to free up your eligibility (plus you have that capital to work with in your new location). As a vet we can utilize low down payments to our advantage. There is a 5% conventional loan that is little known to the marketplace and it can only be utilized if you do not own another home upon closing. After utilizing this conventional loan, you use the 0% VA Loan to purchase your next residential property, and next use the 3.5% down FHA Loan for the 3rd property!

I can PM you the post verbatim with better explaining. I screenshot it because it was so informative and good.

Hi I would not sell. 500 income on a SFR rental is not bad. Could you make this much on a small multi or SFR in your new area? If not why would you sell?

Renting from a distance is simpler than you think especially in a Mil town.  Find a friend to do small stuff and have a list of Mx folks handy.  Renting and tenant screening can occur via the web.  Some realtors will help show the house and get someone in it for a fee if you don’t have a close friend or mngt company to help you.  You could consider a home warranty if appliances are older.  USAA has tools on line for landlords to include tenant screening service.  You will have headaches once in a while but it’s definitely possible.  

Another benefit to keeping what you have is tenants will continue to pay down the mortgage. 2018 VA entitlement jumped to just over 450k. I am currently approved for VA loan #3. Forced PCS's 2x and now preparing for separation like you. I Plan will be to use it on a 4 Plex and hack in it. But only if the price works and not to exceed by amount left on the VA entitlement. Your case depends on how much entitlement you have left vs multi family prices in the area. I was told if you already have a VA loan, you must have 1 yr left on duty to use the entitlement again while on duty and it can't be in the same area you already used it. So if your separating, ask the specific question what rules apply to a new loan if you retain the old one. Lastly not sure when you bought your current place and the interest rate but the IRRL streamline refi is a good thing if rates are much lower now compared to when you bought your house. You maybe required to put down 20% or more to refi on a conventional loan. Lastly all VA loan officers are not equal. Shop around and don't accept the first answer you get as gospel. Currently I had three loan officers give me different info on my situation. If I would have stopped at the first one, I would not be ready to make an offer on a multi worth 300k. I am no expert but things to consider. Best of luck and thanks for your service!

Jon

Originally posted by @Russ Fry :

just so I know do you have to reside in one of the units to use the VA loan for a mulitfamily?

You only have to live in one unit for one year according to VA guidelines, but there are ways around it like setting up a PO box down the road from your property.

Someone feel free to correct me if I'm wrong, but I believe the zero-down backed portion of a VA backed loan also increases in if the property you're buying is a multi-family. So the base rate you find for the area might be higher. Let me see if I have that database for you...

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