Alternate strategies when can't meet 1% rule using VA Loan?

8 Replies

Hello investors!

I'm searching for my first multi-family deal in the Tacoma/JBLM area where I plan to use my VA loan to finance. I do plan to owner-occupy.

So far I've found some nice properties but they won't cash flow at all or won't meet the the 1% rule if I put 0% down. When I work the numbers backwards the properties start to cash flow once there's a 15-20% down payment applied and the mortgage decreases. These properties are 300k+ so I'm not able to put down that much.

Has anyone been in this situation before? What other strategies could I use? Am I missing something? 

Thanks in advance!



@Frank A. You make your money by purchasing a good deal and letting someone else pay your mortgage. Don’t force something that isn’t there. That being said, maybe try to find something that needs a little more love and where you can add value.

Are you finding these homes through the MLS? Can you go to a wholesaler, do hard money, and refinance later? Can you fix one side rent it, and then fix the other side while you live in it? Does it have to be Tacoma? Can you go somewhere cheaper? Can you rent out a bedroom on your side too?

BP has books and articles on all of these different topics. Definitely check them out and don’t lose money simply for the sake of getting started.

Good luck!

V/r,

Kristin

Frank

Have you considered bringing in a partner or hard money? If so let me know. Im in the tacoma area and looking for MF in the south sound. I see your from the lone star state. Just relocated up here my self a couple years ago. I have a rental in the dallas area. 

@Frank A. Tacoma has been on the radar as a hot real estate market for a few years now, it's going to be hard to find good deals from out of state. You are competing against locals with inside knowledge and contacts.

@Frank A. - Depending on where you're buying, you could consider renting one (or more if it's multi-family) of the units as an AirBnB or corporate rental. These strategies can often increase cash flow. You can also take advantage of other income streams like renting onsite storage, coin-op laundry, etc. A good agent will be able to help direct you to where there is demand for STRs.

With a VA loan, your main advantage is getting into a property for zero dollars out of pocket at a low interest rate (money is on sale right now!) and not paying PMI. One of the disadvantages is that the property will need to hit certain livability and condition standards so if something needs $60K in reno and major system upgrades, you likely won't be able to finance with a VA loan.

Also keep in mind that Tacoma has seen significant rent growth over the past few years and will likely continue to experience this in the near future given the housing shortage and significant demand for B and C class rentals.

@Frank A. Biggest piece of advice - make sure you run the numbers to see what it looks like as a rental after you move out and PCS to a new duty station. Yes, doing a house-hack is great and if you have the other 3 units rented out while you are living in it, it will pay your mortgage, but you want to make sure you will have positive cash flow once you move to your next duty station. The worst thing that could happen is that you PCS three years from now and are stuck with a property that has negative cash flow and you can't sell for what you owe because the market has slowed down and/or dropped. 

It may make more sense to look for a single family home that has 3-4 beds and rent out the bedrooms (if your family dynamic allows for that). Again, run the numbers to see what it looks like once you PCS.

In an expensive markets, sometimes it makes more sense to just rent your primary residence and put your cash to work somewhere else. Always look to see what it costs to rent verse what it costs to buy. Sometimes it makes more sense to rent. @David Pere has a really good post about this very subject if you search for it - or just ask him to send it to you. 

@Stuart Grazier thanks for the shoutout brother, @Frank A. I am currently renting my primary residence, and subletting two bedrooms on Airbnb in order to cover a large portion of my living expenses. I would be happy to share that article, or help walk you through this decision if I can!

Originally posted by @David Pere :

@Stuart Grazier thanks for the shoutout brother, @Frank A. I am currently renting my primary residence, and subletting two bedrooms on Airbnb in order to cover a large portion of my living expenses. I would be happy to share that article, or help walk you through this decision if I can!

 

I'd love to get a link to your article! 

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