Profit and Income Allocation w/ VA Loan

[Brian Volland]

To start, I'm assuming a 4plex purchase price of $250,000, cash flow of $1k/month, an additional $1k/mo from personal income, and ~$14k starting funds. This would be the first purchase and bought using a VA loan @ 3.75%.

My quandary comes after I've bolstered my repair/maint and cap ex funds using the cashflow and personal income (2k/mo) and I start looking towards a second property. VA loans appear to be a great way to get started with no money down, but they are terrible for equity and, thus, the "refi and pull equity for next purchase" plan. Based on the assumptions above, I can feed the $2k/mo into the principle, but, in 18 months I would just be hitting 80% LTV based on amortization tables I've run. So I'd have to keep funneling money into the principle until I could pull out a reasonable amount in, say, another year. That's 2 1/2 years of waiting to be able to get after a second property which, with a conventional loan, could not exceed $150k. (a $36k down payment). The plus side is that once the second property is purchased, both are already at 80% LTV and start making usable equity. That means I could start paying down the principle with, potentially, an additional $1000 to speed along equity growth and towards a third MFR.

Alternately, I could just throw the $2k/mo into a savings account and wait the same amount of time but be able to purchase a $300k property. The downside to this is that I feel like my money wouldn't be working for me, or at least working very slowly, during that 2 1/2 year time. Without paying in to the principle, the mortgage on the first property would not hit 80% LTV for 9 years. But with two income generating properties I could potentially THEN start paying down principle on the first.

So, what is y'alls opinion: Pay down the mortgage so the usable equity can passively grow? Or set aside the $2k/mo elsewhere and grow them into the down payment for a second property? (Would you use the $2k/mo instead of letting it sit in a savings account? How would you use it?) And most importantly, why did you chose your choice?

**NOTE** I do not want to jump from residential to commercial until I am more established so any second property would still be a 4plex or smaller.

Thank you for any opinions/help given.

[Troy Meyer]

Being retired military and have had several va loans, if you have the down payment the va might not be the cheapest route to go due to the va fee. If not its a great benefit.
If you're single soldier, house hacking may be the best way to go verses a multi family simply due to the month to month and face to face with your tenants. As you know most of them will be single soldiers who don't qualify for BHA and are motivated to get out of the barracks. I'm not sure what your job is but I did a lot of deployments and you may not be able to manage three separate long term tenants on your first investment property. Especially if you're out of the country.