Roadmap to Growth Starting with VA Loans

[Chris Kay]

Hello, I'm looking to start investing in rental properties in the Upper Peninsula of Michigan in Marquette County beginning with house hacking multifamily homes using the VA loan. I've used the rental calculator enough now where I think I can find a few 2-4 unit properties that can cash flow at least $100 a unit even with zero down, though the pickings be slim at any given time. I have VA disability to waive the funding fee and don't pay property taxes for the property I'm residing in.

I've used the VA loan 3 times before so I'm pretty comfortable with it, but only for single family homes. I'm currently using about $120k of the $805k entitlement for 2025, so my plan is to purchase an MFH soon and move into one of the units while my parents become the tenants to my current home. I then plan to do this again or maybe 2 more times depending on the ability to stay under the VA entitlement cap.

But that's all I'm currently smart enough to plan. Obviously it's a start but I don't think I can cash flow more than a few hundred dollars per property with zero down so what do I do next to keep growing my portfolio? I should mention my dad is a disabled vet as well and is maybe interested in growing a portfolio too so we could team up. I don't personally have tens of thousands in cash on hand for larger down payments (I do though in my TSP/401k), but my dad will have maybe a couple hundred thousand after the sale of his house soon. I'm not sure his willingness to part with that cash though unless I can make a convincing argument to invest.

Any help would greatly be appreciated in seeing the bigger picture roadmap here for how to turn this small MFH house hacking into something far greater. Thanks!   

[Drew Sygit]

@Chris Kay it's VERY difficult to cashflow with 0% down purchases.

We do 0-10% down Land Contracts and know going in we may actually have negative cashflow - which is acceptable given the low down payment and avoiding mortgage costs. We also have a PLAN to improve the properties, thus increasing rents and improving cashflow.

So, it's important to have a pretty good PLAN about what your goals are!

First, please do NOT think you're going to generate enough cashflow to live off of within 3-5 years. 

Can it be done? Yes, but you'll need a whole lot of "luck" and extensive knowledge and work ethic. It will also require extensive networking to raise funds from other, legally, to buy at scale.

Recommend your plan be more realistic with a goal of 10 years for your real estate to be generating enough cash to live off - and even that may be a bit optimistic.

How to grow?

Like almost everything else in life: Short-term pain for long-term gain!

Buy a duplex and MAXIMIZE the cashflow!
- Live frugally!
- Rent out the extra bedrooms in your unit to roommates or for even higher rent on Furnished Finder.
- Rent out the other unit as STR or MTR for max cashflow - which will require you to become an expert at those businesses.
- Learn how to do your own repairs & rehabs to save money now. In the future you'll hire this out, but the knowledge gained will help you avoid getting screwed by contracators!
- Network with local agents and investors, so you start getting first crack at new deals.

If you can amp up the cashflow on the first duplex, you can use the extra cash to:
- Pay down the mortgage, setting yourself up for a future refinance to free up your VA Entitlement.
OR
- For your next acquisition.

One of your biggest challenges will to keep the cash flowing when you move out of a duplex. Not only will you lose your property tax exemption, but you may need to secure LTR tenants. If you can keep your properties near enough to each other, it would be better if you can keep renting them STR or MTR. These do require more time and organization though.

Looking forward, after 5+ years of owning a property, assuming you bought in an appreciating area, you should have enough equity built up via tenants paying down your mortgage for you and appreciation to refinance out of the VA loan (if you haven't already) or even cashout to buy more or to supplement your earnings.

Theoretically, if you have enough properties you could refinance at least one a year. Then MAYBE you'll have enough income to lice off your rentals.

Again, a more likely timeliine for this is around 10 years or more.

Good luck!