New build 4-plex w/ VA loan

[Alfred Hall]

Greetings BP fam, 

I'm looking for insight into the project I'm trying to build. How would y'all suggest a new investor approach using a VA-loan to make a 4-plex in or around South West Denver? I would like to finance the cost of the land and the construction into the same mortgage. I would go in with another Veteran on the property and together and I have one person willing to rent long-term. We planned on using the last unit to host Travel nurses or an Air Crew crash pad... something along those lines. We'd like to use the potential rental income to qualify. We would ideally like to keep the project under $1,000,000 dollars and between us and our renter, we'd like our monthly payments to be under $2000 each. $1500 a month would be ideal. Thanks for taking the time to read and doubly so for those who reply.

[Erik Browning]

Quote from @Alfred Hall:

Greetings BP fam, 

I'm looking for insight into the project I'm trying to build. How would y'all suggest a new investor approach using a VA-loan to make a 4-plex in or around South West Denver? I would like to finance the cost of the land and the construction into the same mortgage. I would go in with another Veteran on the property and together and I have one person willing to rent long-term. We planned on using the last unit to host Travel nurses or an Air Crew crash pad... something along those lines. We'd like to use the potential rental income to qualify. We would ideally like to keep the project under $1,000,000 dollars and between us and our renter, we'd like our monthly payments to be under $2000 each. $1500 a month would be ideal. Thanks for taking the time to read and doubly so for those who reply.

Hey Alfred, 

Yes, you can do a VA loan new construction multifamily where you acquire both the raw land as well as the construction into one simple product. It's called a "One Time Close" (OTC) loan.

I'm going to shoot straight on this reply because many folks are sold on how easy it is to get this done - it is not for most people, but some motivated folks it's perfect for.

It can be easy if you are a motivated and organized person that is not delusional about what is required to get this done. Additionally, correspondence with contractors is the toughest part once you decide that you are willing to put in the work. This is a full time job both prior-to and during construction - you play a pretty big role in making sure this gets done. So you may want to ask yourself: are you a good manager? Can you stay organized? Can you motivate other interested parties to keep the project on track? If so, then continue reading.

Here's how to do it: 

1. You either buy a piece of land yourself before talking to a lender like myself and "essentially" a refinance occurs where the cost of construction. OR you go shopping for the land that you don't own yet and do a straight up purchase.

2. Before I can even think about seeing what you're preapproved for, you need to find a contractor that not only gives you a quote on the cost of construction, but that they filled out all of the necessary forms from both myself and the VA. AND - they have to do it correctly. *Anyone reading this and thinking they will do this work themselves to save money: No, you cannot do any of the work yourself*

3. With that information, then I can start to put the pieces together with what you can actually afford while factoring in market rents to help you qualify for more. Meaning you can use the projected rents to help you qualify for more.

4. With the contractor approved by both the lender and the VA, the contractor's plans approved, and then your "credit underwriting" (financing) approved, then we can actually set a date for you to close. When I say close, I mean that the financing closes before any construction even begins. An appraisal is completed, the cost of construction is solid, your financing is secure, and the plans to build are set into motion. Within 30 days of you closing, construction must begin. Projects are expected to be completed within 11 months or less.

5. Throughout the construction process, your contractor has the option to receive compensation (draws) either in one lump sum at the end or throughout the process. 

6. Once construction is complete, the appraiser will come back out to make sure it's all done and then you will move in.

Look, these 6 steps might sound simple but they are not. I'm not trying to discourage you, but most people just don't want to deal with it because they just don't know this information. You might be different, though, and your ability to manage your own life, job, family, plus this construction project for the better part of a year is something you can handle. 

I'm a veteran, investor, used a renovation loan (similar process as this loan) myself and like working with both investors and veterans. I'm helping a client of mine in Washington now build a home (he already owned the property) and am happy to connect. 

Either way, I wish you good luck on your journey no matter how you pursue it. Best.