Seeking Feedback: Use VA Loan to buy quadplex in SF?

[Jon Li]

Hi, I'm relatively new to REI and am considering purchasing a quadplex in SF which I would occupy. It isn't cash flowing, but I wonder if it's a good opportunity given that:

1)  I'm paying $2600 rent each month anyway

2) I could use my VA loan for a 0 down payment purchase of a ~$1.25M quadplex in SF

3) Area is up-and coming w/ new Whole Foods, etc; chance for appreciation

4) Long-term tenants in high demand area, no concern of vacancy

5) The units are below-market rent (could likely increase at least $1500 total)

Would greatly appreciate any feedback (please note, numbers below are approximate). I wonder if I should factor in mortgage interest tax deduction as well though perhaps too small to matter. Another part of me thinks I should wait a bit and continue renting until the market cools down to use my VA loan, though who knows when that will be...

PURCHASE PRICE	1250000
MONTHLY RENT
4 Units Total	5500
MONTHLY EXPENSES
Mortgage	5526
Insurance	1000
Taxes	900
Repairs	950
Monthly Total	8376

[Adam L.]

Hello, Jon, and welcome to REI. I will start by saying I have not purchased any properties myself; however, I have analyzed many properties and I have a decent idea of how to do that.

My first question is how the rent is only going to be 1500 if you are currently paying 2600 I'm rent. If that's the case why would you not be in a place that should only 1500 right now? Just a finance question to start the process.

As for the numbers, you're out to want to look at the property as if you're not going to live in one of the units if for no other reason than I'm guessing, judging by your profile pic, you will not be staying there for ever being in the military. Immediately off the bat it looks like you are losing 2800/month but after plugging in some numbers (you're provided numbers which I am assuming you already researched) it looks more like you're losing 3400. I say this with the below numbers:

Rent Income: $5,500

Expenses:

Mortgage: 5526

Property Management: 385 (7%. Even though you may do it yourself, again, act like you won't be there forever.)

Taxes: 900

Insurance: 1000

Repairs: 275 (I'm changing this a bit to 5% of rent)

Capex: 550 (large expenses calculated at 10%. Things like roofs, appliances, etc.)

Total income: $5,500

Total expenses: $8,911

Now keep in mind, this implies each occupant will be pay their own utilities, trash, etc. I would say this is certainly not a deal you would want to endeavor into. Perhaps you can look for a multi family that needs some repairs and rather than use a VA loan try and get a 203k FHA loan in which you can put rehab costs into it. Just some quick thoughts from me. I hope that helps a little bit.

Also, take a look in the documents and you can find some various excel files that can help you analyze properties.