Starting Out
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback
Updated almost 4 years ago, 12/19/2020
VA loan to house hack
I'm in a pricy market (Portland, OR) and considering a house hack option for a 234 plex on my first purchase. I'd be utilizing VA, zero down financing and understand you can claim rent on the units you don't occupy as income??! Anyone been successful with financing this way?
I'm also looking for do's and dont's, any insight or advice before I pull the trigger. I appreciate your feedback!
Morning Dakota!
I've used my VA eligibility (USMC 98-02, 05-06) a couple times when house hacking, once on a SFR and once on a duplex here in Portland. It can absolutely work.
Lots of moving parts to consider when buying, but my general advice when you’re just starting out is to wrap your head around cash-flows and expectations. Look at it like a continuum...on one end you have 100% cash down which will obviously increase your cash-flow since there’s no loan. At the other end you’ve got 0% down which means you’re financing 100% so more of your “profit” is taken up with loan payments. You’ve just got to recognize that the risk/reward ratio has to work for you (risk=potential for feeding property for awhile, reward=able to get in to a property with little to no money out of pocket).
Should be able to count 70% of the rental income towards your income although that may vary based on individual lenders. Just a heads up that they'll likely want to see a few months PITI in reserve as a 1st time landlord (often 401ks will have a hardship withdrawal clause that can count as reserves). Obviously there's a lot more that goes into it all, but you're on the right path!
@Dakota Harrold
VA loan or not, you get to count the income with a multifamily property. Most people wouldn't qualify for such a large purchase without being able to count it. Definitely check with your lender, I did hear murmurs of Freddie/Fannie requiring prior landlording experience to qualify. I have not heard if that has gone into affect.
Mike Maier with fairway mortgage is very good at getting income properties to qualify. Used him on 20+ deals in portland oregon.
@Dakota Harrold You absolutely can use 75% of the gross income of the other units toward your DTI. You may just need to hire a property manager if you don't have two years of experience as a landlord.
@Mathew Wray
Thanks for your insight! All great points. Something I didn't mention before, I've been furloughed since March which has been a major wrench in the gears of my income thus forcing me to adjust and find a way to have another ave of claimable income before I get back to work if I want to purchase over the next 3-6 months.
I think that with the addition of income from rental units will definitely help once I'm off furlough but am chomping at the bit to start earning equity... Any further advice is appreciated!
Cheers
@AJ Shepard
Solid and appreciate your advice and referral! I'll look into both!
Cheers
@David Pere
Thank you for your insight! Do you know if property management assistance to my small time investor of a dad would qual?! I've never been licensed or anything... He owns 3 SFR in California and I've assisted when/where he's needed it.
Thanks in advance.
Cheers
@Dakota Harrold It never hurts to ask. Ultimately, as long as your lender is cool with it, you're good. If they aren't, find a different lender and get a second opinion, haha
@David Pere
Like your style! Cheers
@David Pere nailed it. You can absolutely use 75% of the gross rental income to qualify. Here's what you'll need:
- Land-lord experience or a property management contract
- Needs to be a 2-4 unit (cannot use ADU or rental income from rooms)
- 6 months cash reserves (6 monthly payments PITI)
Obviously you still need to meet all of the other guidelines to qualify for the loan but you can certainly do this.
Originally posted by @David Pere:
@Dakota Harrold You absolutely can use 75% of the gross income of the other units toward your DTI. You may just need to hire a property manager if you don't have two years of experience as a landlord.
@David Pere does this apply to renting rooms as well or only units as a whole?
@Michael Mejia I believe it is just units because there is an easy way to comp market rents, and there is less likelihood that you are going to "just say you'll rent them, and then choose not to"
@David Pere that's what I initially thought since it would be too good to be true if you could do so by room. I'm getting ready to house hack 2 bedrooms and I'm looking for avenues to grow from there. Thanks for the info!
@Jon Lallande
Great insight and thank you for the input! I wish I could only convince the wife to move so we could house hack Oceanside... Still working her 😉
I guess my continued question is what amount of landlord experience would be acceptable?!
Cheers!
@Michael Mejia
I believe @David Pere clarified in his second bullet point but again I feel I'm hearing that it all depends on lender and lease contract...
Cheers
@David Pere
@Michael Mejia
I lived in Linda Vista for a year and fell in love with San Diego and the surrounding... Do you own there or do you own elsewhere?
@Dakota Harrold I own in Oak Park, San Diego.
The "correct" answer would be 2 years history on your tax returns or a signed property management contract. The guideline states that you can use income if "the borrower has a reasonable likelihood of success as a landlord". So every lender will be different. I would say working for a PM company would suffice.
If you do decide to move to Oceanside, hit up me @David Pere and @Donald E Appleberry , would love to grab drinks and talk plans about real estate.
@Jon Lallande
I just realized I left your @ out the mix talkin all that SD jazz... Good stuff and actually might be next week. I'll keep you informed for sure!
Cheers!
Hey @Dakota Harrold the VA loan is second to none, especially when it comes to house hacking a 2-4 unit. If I personally had access to the VA loan I would purchase the most expensive 4plex that I could get my hands on (as long as it made sense as a long term buy and hold). Living in an expensive market when you have access to the VA loan is a great thing. If you are going to be in San Diego, you should hit up @Brian Koons and @james De Leon, they each purchased 4-unit properties in different parts of town well over $1M , using the VA loan, just a few months ago...ask them how it is going...spoiler alert, neither one can wait until they can buy their next property.
- Twana Rasoul
@Twana Rasoul
I can definitely see the value and perks of the VA loan option. House hacking a plex just adds that extra kick to building your wealth at a more accelerated pace.
Thanks for your insight and the professional intro to some savvy investors doing similar things, much appreciated!
Cheers