Analyzing Homes for VA Loans

[Ryan Daniel]

I have VA home loan that I want to utilize here in LA, and I want to get some different inputs on how I would analyze a VA home loan deal that will serve as a rental down the road. I am approved for 650 from my lender and my initial thought is to buy in a good area/neighborhood that will appreciate over the years. My plan is to house hack and rent out the rooms. I have considered multifamily, but all the multi families here in LA for 650 are usually in really bad areas or neighborhoods. I also have really considered ADU's, but ADU strategy requires a lot of money unless I can find a home that can easily be converted with the original square footage. So my main thoughts are to invest in an amazing neighborhood with a house that I can add square footage, add beds/baths, update, etc. I know how to analyze BRRRR properties, fix/flip, etc. But I was just wondering how anyone else would analyze a home with a zero down owner occupied home loan in an expensive market.

[Corby Goade]

Thank you for your service! I love VA house hacks, good for you for making that leap.

First and foremost- don't buy in D areas or unsafe areas. On paper those properties can be alluring, but they never perform the way you expect. High turnovers, expensive turnovers, vacancy, demanding tenants, evictions, capex, etc. Those properties are anything but passive. 

Buy in a B area or better, especially if you are going to live there. At a high level, if it cuts your living expenses in half or better AND will be cash flow positive when you move out, that's a pretty solid deal in southern CA. You'll find that those properties will appreciate nicely and rents will rise reliably. It won't feel like a great deal the first few years, but after 8-10 years, you'll feel like you hit the lotto. 

Best of luck!