Hey BP family!! Was reading up on the VA Loan and how it works and reading some posts on BP specifically Chris Mason, Lender in CA (#1220177) on "VA Loan for 2-4 units, what you need to know. Active or EAS'd." today and I was wondering since the va loan looks at DTI is there still a good chance of me being able to use the VA Loan even though im single and joined the military just about a year ago? A little back story im 19 years old and I have excellent credit score, I have a pretty good amount of money in the bank. I live in the barracks back at fort riley but currently deployed. I understand if I do purchase a property I wont be recieving BAH because im not married or the rank to recieve it. but im getting paid seperate rations even though its not as much as the BAH, im not really worried about recieving BAH honestly. Im willing to find/hunt for a GREAT deal that will be enough cash flow that will cover everything untill im ready to get married or the rank to recieve it. So basicllay todays question is will I still be able to get accepted for the VA Loan even though im single and never been an landlord? and if you have any other input on my current situation on how I should handle this please feel free to tell me.
If you meet the requirements for a va loan and you have the money required by the lender then you can get approved. However, as an e1-e4 you won't really make that much without BAH and as a homeowner you have many more expenses involved than just rent. Unfortunately with the VA loan you cannot count rental income towards your overall income without 2 years experience land lording. With the amount of income you will get at those ranks you are going to struggle paying a mortgage and any unexpected expenses.
My suggestion would be to save all you can now in the Bs (you can live of literally no expenses whatsoever). Put all of your money into something that provides you income besides real estate (a few bond and stock etfs for instance). Do your best to be the best you can in order to rank up quickly. Save a lot more on a deployment ( don’t forget to fund your SDP). Build your cash reserves.
Once you have a lot of cash reserves you might try the @David Greene method of BRRRR (check out the book if you haven't yet). Once you meet the rank requirements, or get married (don't get married just for the BAH or you'll definitely regret it); then use your VA loan.
I agree with Jared on this one. You will most likely not qualify for what you are looking for and if you did qualify it would most likely not be to your advantage. 1st step for you is to place $10,000 in the SDP while you are deployed (10% interest account funded by the military for deployed soldiers). Continue to make a nest egg while deployed. Though everything Jared told you is extremely sound advice (i.e. hold out on VA till you have BAH-either through wife or rank), I would say that once you have built a solid deployment money nest egg, while still living in the Barracks, look into buying a fixer-upper foreclosure for cash. Depending on your area you can find a handy-man special for as little as $35,000 to fix up on your off time instead of just getting drunk and playing video games like most others do with their free time. You would not need to worry about BAH as it is already paid off and as soon as you get it fixed up you can then rent it out and choose to either collect 100% rental cashflow or you could Refinance it to pull cash on your next purchase (BRRRR).
Bonus step: Make sure you are placing money in your TSP as you can later pull a mortgage out of your TSP where you are paying yourself back with the interest (I never contributed to my TSP but I had many NCOs figure out this loop hole)
VA loans are intended for your primary residence. If it's your primary residence, it produces zero cash flow and you don't get BAH as a reimbursement for housing expenses. If you intend to purchase a rental property, you would need to lie, a.k.a commit mortgage fraud, in order for it to qualify for a VA loan. The next problem is that you will probably PCS within the next year or two. That would leave you with a property that has zero equity, harder to sell, and you would need to hire a property manager for your property. They will not do as good a job as you would do. I've seen this happen so many times, including to myself.
@Paul Farmer I agree with @Anthony Dooley, if you plan to buy the house and remain in the barracks, this is mortgage fraud. Only way you could cash flow is with a duplex, triplex, or fourplex.
There is some solid advice in the above responses, I'm all for building capital as fast as you possibly can, but it may not make sense to take the mortgage on without BAH, unless you find a hell of a deal!
You will need to be receiving BAH and have authorization to reside off post, as you'll be required to occupy the property. You absolutely can purchase up to a 4 unit property with the VA loan once you have authorization to reside off base in privately owned housing. However, projected income from the other units will not be used as a qualifying factor for you. If you can afford the purchase price of the property on your own merits, there is nothing stopping you from purchasing a residential property (1-4 units) with the VA loan.
In my own case, when I used my VA loan a second time, I was able to write off the monthly debt of the first property by providing a signed lease agreement to the lender of the second property. Mind you they did not count it as income, they simply took the debt out of the debt to income ratio calculations. For reference the second VA loan was through Navy Federal Credit Union and was a duplex. I currently have two active VA loans. I hope that helps answer the question.
Thanks so much guys @Jared Viernes @Shaun Futch @Anthony Dooley @David Pere for the advice and the knowledge. I definetly dont want to commit any crimes while investing in real estate. I would if accepted for the va loan would purchase a duplex/triplex/fourplex and leave one unit for me to live in. I already look in the regs for the army and I could live out of post even though im single I just wont be recieving the BAH. The army just has to provide a living space for single soldiers which doesnt mean you have to live in there, and thats when if i crunch the numbers right and make sure im doing all the numbers correct if i do purchase a duplex/triplex/fourplex it would be positve cash flow that would cover and replace the BAH that i would be recieving if I was married and had the BAH plus more. But im also investing in stocks and mutal bonds and also the SDP and TSP. im doing my part fancially im just so anxietious to start my Real Estate career i feel like i missing something which is time. But thank you SO MUCH for answering my question plus more. I will definetly be posting other questions that i have on BP knowing that theres people actually reading this and giving amazing feedback.
thanks @Andrew Johnson ,
Hopfully i will be able to purchase the right property and be able to use the va loan without any hassel.
Maybe since you are single you could get a SFH and rent out extra rooms. It would be cheaper to buy them 2-4plex. You of course would need to live in one of the rooms.
@Paul Farmer you are not missing anything. There will still be property for sale when you are ready.
@Paul Farmer , good on you for getting started early - I can relate to wanting to get started yesterday. You've gotten good advice to consider so far. Here's my added two cents. First, if you're not already, set your TSP contributions to a minimum of 5%. Since you're under the BRS, get the maximum match DOD will give you. After that, if you want to go the real estate route, save as much as you can over the next couple of years and read as much of BP and the recommended resources as you can to learn. I think you'll have a really difficult time qualifying for a mortgage as a junior enlisted without BAH.
A cash foreclosure fixer-upper may be doable, but you'll need the funds to both buy the property and make the necessary repairs and the foreclosure process can be a bit lengthy and incongruous with deployment or PCS schedules. I've been interested in something like that for several years but haven't been able to make the timeline work with deployments and PCS. I do know a former sailor of mine who did that type of project recently, but he partnered with some buddies and they were all at least E-5s with BAH on shore duty, so they were non-deployable and had the cash on hand to invest in the project. Your choice, but I wouldn't recommend going that route in your situation. To be frank, you don't have the financial cushion at your current paygrade to pay Murphy's toll if it hits a snag.
I think your best bet at this point is squirreling away all the cash you can while you're still living in the barracks and do what it takes to advance as fast as possible so you're eligible to receive BAH. It may take 2-3 years but at that point you'll have the income to qualify for a VA loan on a multi-plex and ample funds on hand to handle repairs, upgrades, and vacancies. I know the temptation to do something NOW! but looking back over the years, the dumb money mistakes I've made all came down to the same root cause: impatience. Even in those circumstance where I didn't actually lose any money, the added stress of putting myself into tight spots wasn't worth it in retrospect. I could have easily waited the extra 6-12 months to save a bit more and ended up at basically the same destination without all the hassle.
You've got a long investing career ahead of you - take the time to build up a solid foundation that'll last through the next several decades of your life.
@Account Closed , thanks for your advice. I really do appreciate everyone who has contributed in helping me make a decision. Your last statement really hit me and made sense "take the time to build up a solid foundation that'll last through the next several decades of your life." I love it. Instead of investing in a property now, I can invest on more books and listen to more podcast to help sharpen my skills and just having more knowledge on real estate investing to make me an empire in the near future for me and my future family. This motivates me more now to save up even more and to build a foundation without buying any foundation yet lol. thanks for the guidance from you and everyone on BP.
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