Considering buying a duplex and renting it out with VA loan

[Joseph Blanchett]

Good morning everyone,

I'm pretty close to getting into real estate and buying my first House/Duplex. I've ran a couple of numbers on duplexes that I've found. Here are my organized notes of what I've considered. I'm sure there's holes in my plan which is the reason why I'm posting this.

Value: 100,000

Estimated Mortgage: 120,000(Includes rehab+other expenses)

Interest Est: 5%

Years: 20

Monthly mortgage: 792.00

Duplex 2:

Value: 84,900

Estimated Mortgage: 100,000

Interest: 5%

Years: 20

Est monthly mortgage cost: 660

Rent for tenants:

Charge each tenant: 500.00-700.00

Utilities: Split

Ways to make cash flow:

1. Airbnb
2. Acquire another roommate and charge for rent
3. Live somewhere else acquire two more tenants. This may cover both my monthly rent and mortgage

Possible issues

1. Repair such as HVAC, Roof, etc.
2. Leave current location won’t be able to manage it
3. Possible negative cash-flow

Mitigations:

1. I currently have a small emergency fund that will cover one of those repairs. Also, I can verify the working order of all items with inspections etc.
2. If there are issues Possibly acquire a loan to fix them (requires more research)
3. Since I’m military this is a very plausible issue. One way to mitigate this is networking more and finding a property manager
4. May have a negative cash flow at first but I can mitigate this over time by either getting another roommate or moving out and renting it out.

More info: Since I'm in the military I get a paid a specific BAS per month. Also, I qualify for a VA loan so this will make the initial buy easier. I have a "Good" credit score so this won't be a problem. I set the rent low due to the fact that the BAS in my area is set to 700 so I can use this and make it competitive among others. Any feedback on things that I've missed or made a mistake on would be great. Thank you!

[Patti Robertson]

The VA loan is such an awesome benefit for people who are able to live in a multi-unit. I always tell my military clients who are in your situation - why buy a 2 unit when you can buy a 4??? The VA and FHA residential loans can both be used to purchase a 1-4 unit. Usually there are already some tenants in place, so they current rental income would be used for the loan qualification. If the underwriter gives you grief about not using the income because you are new to investing, you can usually get around that by hiring an experienced property manager. The only draw back is that the purchase price will eat up move of your VA eligibility than a smaller building. After some years of buying down the equity though, you can refi this loan off based on loan to appraisal with no money out of pocket, so you can use your VA again when you are ready to buy that fancy house to live in.

Do it!!!