Veteran Real Estate Investors

[Adam M Drozdowski]

Hello! I am an active duty service member who has been listening to the bigger pockets podcast for about a year. In 3 months, I am separating from the military and am eager to start investing in real estate. My goal is to move back home and use my VA loan to acquire a small multifamily property as my primary residence while going to school full time. Does anyone here have any experience with using the VA loan? Also, if there are any tips or tricks you would be willing to share that might help me out I would greatly appreciate it!

Thank you!

[Chris Levarek]

Hi @Adam M Drozdowski. Great idea! I wish I would have gotten started using the VA loan back when I exited as its a great opportunity for getting into investing at low cost. The requirements for VA loan need to be met for purchasing any property and multifamily is no exception.

Appraisal: The property must pass the appraisal and be liveable, so the following will be important:

• Residential Property - Is it residential? Commercial or business will not pass. 1-4 unit qualifies
• Living Space - Is it big enough to live in?
• Water & Sanitation - Does it have clean water, water heater, etc/
• Heating - Does it have Heating
• Mechanical Infrastructure - All heating, cooling, electric, water must be in good working order
• Property accessibility - Must be accessible from street, aka. not over someone elses property, joint driveway(may or may not qualify), etc.
• Pest inspection - Again, must be livable. No pests, termites, bees, etc.
• (Not all requirements listed here)

So you can't really do a BRRRR with a multifamily unless its a really nice property with minor repairs as it would not be livable when bought most likely. Main thing is it has to be livable. Also, the VA will only qualify the loan for an amount that meets the appraised value, so anything over will be out of your pocket. ie. If you negotiate with seller and agreed price is higher than appraised value when you do appraisal, you will have to pay seller the amount above the VA loan appraised amount.

Intent to Live:  the most important part and what is often missed is you have to live in the property or have the intent to live in the property, 

Side Tip: You don't necessarily have to live in the property, just have the intent to live in one of the units. You could hypothetically spend 6 months and a day fixing up with contractors the unit you intend to live in, then refinance on the 6 month and a day to a new loan. Also, I know if you are deployed, you are considered to be "temporary duty status" so you could be deployed for 6 months and a day and do the same without ever moving in. This means purchasing a multifamily for 0 down and refinancing to a new loan after said period. 

That being said, it is far easier to live in one of the units and manage the other tenants as well cutting the property management costs.

Lender Requirements : Lenders will want to be sure you can cover the mortgage. Some might or might not include the rental income prior to you purchasing the home. So, if the mortgage payment on a duplex is $1400 a month and the property makes $700 in rental income, you might only have to qualify for $700 rental income with regards to your personal income versus proof you can make a $1400 payment. I recommend shopping around VA lenders and looking at their requirements, terms, etc. Some might want 6 months cash reserves as well as prior landlord experience. Some might want long lease terms for renters, so they know rental income is guaranteed for a certain period so do your research.

Hope that helps in some way. Good luck!