4 unit apartment building as a 1st investment?

Question

I'll be getting out of the military in 6-8 months from now. I don't know the RE market if its good or bad as for today. I want to use the VA home loan for my first purchase of a investment property later on. Just don't like the idea of buying a property for personal use, and make no money.  I read you can use a VA home loan up to a four unit for every vet that occupies one unit for 6 months. Anyone here have used a VA home loan as a investment?

Kerry Baird · Answer

You will have to certify that you will occupy for a year.  Yes, you can go up for 4 units.  When we used our VA last, my husband had to obtain a letter from his employer that showed how long he had left in obligated service.  IF he took a job in another line of work, he'd have to show 2 years employment, I assume to show stability of pay.  He did have enough time, so we didn't have to obtain any further paperwork.  However, we are looking at using my VA now, and my hubby is at the end of the road, like you, he has about six months of obligated service.  We haven't been down the path long enough with this lender to know what he will expect, in terms of "proof" of continuing employment.  It makes sense that he would vet us, and you, in this aspect.

The other tenants in your 4 plex do not have to be military or veterans, by the way.  And for the market cycle, they are local to you.  So, if your local area has a lot of jobs and a wide variety of industry, it can be healthy, in spite of a national down turn.  Denver slowed down on sales, for example, but prices didn't fall off the cliff in the last downturn.  Whereas Tucson or Las Vegas prices fell, and fell hard.

That is part of your due diligence.  Very probably there is a college or university near you.  Perhaps you can contact your local chamber of commerce and see what their plan is for future growth.  We go to our Military Advisory meetings with our local Chamber, and it keeps us aware of what projects are coming up.

I also like demographics, particularly the ESRI Tapestry.  I obtained a local county map from my Realtor, and pinned up sticky notes for the 3 main ESRI categories on each ZIP code that I was looking at.  It helps me know who the main occupants in an area are, so I can work out what kind of housing makes sense there.

Lastly, if you plan on working in real estate, I saw a post here at BP where a spouse had gotten a real estate certification of some kind, through veterans retraining.  We have yet to take the TAP class, but will be looking for opportunities to expand our knowledge in real estate when we get to that point.

All the best as you transition~

Micki M. · Answer

@Nate S. I love your attitude.  I can't stand the idea of owning something just to live in either, why not generate income for yourself, especially with the opportunity the VA loan provides? (I wrote an offer on a triplex yesterday)

Since you are new to investing and real estate, I would recommend getting your MLS access through a good real estate agent.  Ask around on BP I'm sure you can get an investment savvy referral in your area.  They should set you up with an email search that will alert you as soon as anything new hits the market, and should also be actively looking for on and off market properties for you.  Most importantly they'll be able to guide you through the purchase process so you can avoid rookie mistakes.  Good luck and keep us posted!

Nate S. · Answer

Thank you for all your input. I plan to get out, go to college(GI bill), and work a part time job which would be govt. I didn't think of the 2 year stable work requirement, would that be problem? I'm stationed in Italy all I can really do is call a few banks for info. Would disability count towards stability of income to help qualify for VA home loan? I want to get my RE license, and join the local RE clubs that I know of. I'll be in Nebraska area, I know the prices don't fluctuate much. There is Offutt Air Force Base which provides stable rental income like BAH.

If I do purchase a 4 unit, I want to do month to month rent, keep it really simple- don't pay for next month, move out. Live there, play the role as a manager. Only way I could get "landlord experience" is buying a 4 unit.     I want access to the MLS, so I can find deals that come to the market. I'm doing TAP as I type this, doing the boots to business class, I'll ask about the RE certification. Paying mortgage payment for a year shouldn't be a problem.

Jerry Padilla · Answer

@Nate S.

VA is a great product. You can go up to 4 units, but without a 2 year history of rental property - VA does require you to support the entire mortgage payment. It is a 1 year requirement.

Joe Ellis · Answer

I recently separated from the AF and I had originally had the thought that I was going to buy a second home and rent out my current residence. I started looking September/October timeframe last year and I was deployed at the time but my wife was still here and so she was going out with the Realtor helping look and whatnot. So we found a place and we really liked it but when we went to speak with a lender he told us that since I was separating I wouldn't qualify unless I was going into a job within the same field, which I wasn't. I was a mechanic and now I'm a Realtor. Speaking with a lender is something that I'd suggest you do before you decide. If you find out you can extend for another 6 months or so just to let you get into a fourplex then that would be something worth thinking about that way you have some extra income AND it gives you time to have at least a year of "landlord experience" which is another thing the lender had mentioned I would need.

Another thing you might think about doing is renting out a room in your current residence and making them sign a lease and whatnot that way you can prove to the lender once it comes time for you to have proof that you've had the experience instead of just saying "I have a room rented out in my home" you can just hand them the paper with the tenant's info on it; it carries more weight, if that makes sense.

Good luck and keep us notified with what's happening!

4 unit apartment building as a 1st investment?

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