VA maxed, FHA in use, what next!?

8 Replies

I have been lurking around the site a bit (Thanks for the referral Trevor Burns!!), and have gotten lucky up till now (good advice from lots of sources), but want to know how to go about the next step!

Current situation:

2 homes owned in TN through VA loans, total debt (originally financed) $318K

1 home in AK (current residence) $250K financed. 

Total real estate debt $568K.

2 homes in TN monthly rental income (after property mgmt fees  ~$2,400, M,I,PM ~1,900

Current mortgage (financed FHA) ~$250K, approx $1,800/mo payment with $1,000/mo income from renting out MIL suite.

Bottom line is all properties are making money, with exception of current, unless you count BAH  (Army pays a basic allowance for housing which I would hate to pay to anyone other than myself)as income, but even without BAH, we are paying less than half of a mortgage payment out of one paycheck. 

Where do we go from here to pay for the next house? We have savings accounts (personal for unexpected expenses such as vehicle repairs and such, and property savings for heaters, A/C, water heaters, etc) to catch the fluctuations, but don't want to touch the property savings to invest, lest we be caught short. Due to the nature of the military life, my wife starts at the bottom every time we move (not conducive to growing her salary, but adding to savings none the less). 

I have started looking at other options such as OPM (not too sure how to start down that road), or BRRR (lots of $$$ to do the rehab, not to mention the down payments), and just depleting the savings accounts, but don't see a way ahead. I am not looking to partner up right now, I'm not looking to flip, nor wholesale, nor am I looking for hand outs. What I am looking for is financing options. I want to be on the hook for the notes with my wife as sole interests, and let the rental income vouch for the notes. I want to count rental incomes in my DTI. Conventional financing does not allow this, unless counted as profit on tax returns. Due to the frequency of moving around in the military and maintenance costs, it is very hard to show anything but a loss in tax returns lol.

Long winded, I know, but any thoughts or advice would be appreciated! I also have absolutely no idea where the Army will send us next!

Look at a local bank I'm in a similar situation but was able to find a local portfolio lender who was able to do a construction loan for me to get into a house that I rehabbed to live in. Heloc may be an option as well but it will probably not get you far in AK with the higher home prices. Option 2 is save like crazy until you have enough that you are comfortable using savings to buy.

Thanks for the reply John, I should clarify that we are not going to be buying another place up here, like you mentioned, the cost is prohibitive. The military lifestyle makes it pretty difficult to develop those relationships with local banks, lol, since we frequently move, but I will definitely look into the HELOC and other types of loans!

We are also a military family...our recent move (assigned for a decade to the UK) hit us hard in the pocketbook, as we'd had about half of each year with tax-free income, and a nice COLA to offset the dollar to the pound.  So we are running about $25,000 a year in salary behind where we were last year.  I am working to get scrappy!

Here are the ideas I have:

-When we were young airmen, we knew a mil-to-mil couple who continued to live on their entry level salary, while they saved the rest.  Set aside any "gift" from Congress in the New Year.  

-Re-enlistment bonus? Use it as down-payment funds. Others buy flashy cars, we bought houses.

-Deployment? Set aside up to $10k in the military savings account, at 10%.

-Promoted? Set aside the extra for down-payment money.  You are used to living at the current rate.

-Switch your extra income over to something that is portable.  I'm thinking an Amazon business.  Or Amway.  Or Pampered Chef.  Scentsy.  Child care? Teaching (subbing pays $100 a day at the DoD schools in the UK)

-Can you prepare now to increase your income? College classes? Language pay? Flight pay? Temporary duty?

-Owner carry.  Start up a direct mail marketing in your chosen location.  I'd be looking for small multi-family owners.  5 units are the entry out of conventional mortgages and into commercial.  Therefore, these are harder to sell, they are largely owned by investors, who expect to carry back.  Alternatively, you can find older folks who may want to carry back at 5 or 6%.  It is hard for them to find income, and oftentimes they don't want to take the capital gains hit of selling all at once, so income over time works better for them.

Wow, great feedback!

Kerry - I have been withholding pay raise jumps since I joined in 2003, at least for the most part. The special pays such as flight pay, HDP, ID, etc, as well as a percentage of base pay have all gone historically to the TSP, but last year I adjusted the allocations to go primarily into the Roth option. As far as the interest free loans I give the government, we try to minimize those, but we typically get some money back anyhow, and that has always gone to reduce any consumer debt (car notes etc). We will be free of consumer debt in ten months. Where could I find more info on the owner carry option? This sounds like it might work for us, at least at first glance.

William - the first rental was purchased as O/O in Feb 2010, all but a year and a half of the time since it has been rented due to deployments and moving into a new O/O (gotta occupy for VA loan) in the same town. Second home purchased in late 2012, third purchased Feb 2015, and have had the mother in law suite rented since May. We are not opposed to putting real cash in the game, but would prefer to either use a HELOC, or some other type of financial wizardry to avoid depleting savings accounts.

Upen- thank you. We looked into USDA on the way up here, but we were told with other properties we did not qualify for it. The rural development loans didn't work for us this time due to the lifestyle up here, with an eye towards renting to single families, we didn't want to add the caveat of having to haul water to a dry property, and most renters want amenities such as electricity and plumbing lol. Rural Alaska truly is rural "off the grid" at our price point

Again, I would like to say thank you for the great feedback! My wife and I have more research to do lol!

Hi Mike and thanks for the name drop,

Given your current situation I would certainly try to find a private lender or owner finance deal that is structured more toward the value in the property and less on your debt to income ratio.

A bit more risky option may be to use a HML(hard money [email protected] 8-16%) that will finance property and repairs to a 2+ unit property. The deal will need to meet the 70% rule at time of purchase. The intent would then be to refinance to a conventional mortgage in 6mo-1yr. To validate the risk in deal like this should at least meet the 2% rule not the 1%.