Rental Property Investor · Las Vegas, NV · Member since 2020 · 17 posts · 3 votes
Greetings BP
Interested in trying the following method to build real estate rentals.
I wanted to use VA loan little to no money down and use the BRRRR method than refi into Conventional loan. What do you all think of this or can you advice modified plan. Thanks.
@Frederick Peregrino while conceptually that is possible that's not usually the method we use with the BRRRR strategy. I have VA loans and their benefit is that I get to choose whatever home I want to live in with ZERO down and no PMI either and with the absolute lowest rate you can find. That's really hard to beat on any other type of transaction. Comparatively, a conventional loan will carry a higher rate and have PMI (unless you have 20% down). I would say to just focus on buying a great home with ZERO down and call it a day.
IN additiona, remember that VA loans have a owner-occupancy requirement. Also, if you do 0% down, how are you going to refi w/o bring more cash to the table? Its great that the VA loan allows 0% down, but now you can't really refi into anything w/o bring cash to the table. That's the point of the brrr method to be able to "recycle" the same pot of cash.
This is "investing," so you need something to invest with...
This might be a hard strategy for a complete BRRR. A VA loan has high requirements on the state of the building. This loan wont qualify for most fixer uppers. I would look for places that are in good livable condition but need cosmetic updates to enhance the rent and value of the property. While this isn't truly a BRRR, you will greatly enhance your wealth and pay no mortgage while fixing them up. Shoot me a message and ill gladly talk to you more about VA loans.
@Frederick Peregrino What about getting a duplex, triplex, or quad and househack with your VA loan? Maybe something that is in good condition now, but could use some cosmetic love. Once you have the place fixed up, then refinance out whatever you can, and repeat the process. The beauty of the househack is you can eliminate/reduce your housing bill and accelerate your savings.
Oh, were you trying to use the VA loan just to avoid using your cash as a down payment? I suppose... But, look at your costs for the loan, or another loan product.. That's why the "traditional" brrr method is to buy in cash, to avoid the cost of getting a loan. Don't forget, you still have the upfront mortgage insurance fees which I thought can get kinda steep on a VA loan (probably varies on person's circumstance). Remember, you are trying to avoid these "frictional" costs...
You would need to have substantial equity in the property in order to refi and "BRRRR", so there would need to be a substantial value add play, and the va loan doesn't normally allow for this.
I’m trying the same thing. Va loan to brrrr to a va refinanced home. All I have to do is live in it for the 212 days I can turn it into a rental then start new. Showing how we can pay of both houses mortgage with the renter is all that’s needed and alittle tlc for the house