Starting multifamily investment rental portfolio! VA LOAN??

Question

Help! We are ready to start investing in our multifamily rental portfolio. We hope to gain passive income to fund a comfortable retirement, by getting started now, in our early thirties. We would like to avoid making a large down payment, but also don't want to owner occupy. We are military and the VA loan is an option, but they do require owner occupancy as primary residence. Has anyone purchased a multifamily and rented it out without waiting very long, say 6 months? We could probably find a way for me (the wifey) to reside in a property out of state in order to satisfy the primary residence requirement while the hubs is as school, but I wouldn't want to stretch our time apart any more than 6 months. After 6 months, could I legally rent it out and return to live with my husband? IS THIS OKAY? Tell me you stories please.

Brandon Sturgill · Answer

@Collette Douglas Why not get into a multifamily that meets your needs...I guess that's the whole point of small MF...for more than one family to live in the property. Duplexes were mostly constructed to permit the occupants to live independently, but under one roof...just make sure it's a proper duplex with plenty of space. I'm sure you can find something in your market. And it's not uncommon in residential "multifamily" to locate multiple structures on the same parcel...just link up with a good agent...my last recommendation would be to find your own property...pull lists of properties that meet your criteria and start a handwritten letter campaign...you'll get results.

All of these options should be good with FHA/VA or Home Ready, even...maybe USDA...

Jaysen Medhurst · Answer

@Frank Patalano, and the Independence Day parade in Bristol is tops.

Anthony Thompson · Answer

@Collette Douglas buying something that's intended for a long term buy and hold, with hard money, rarely works out #s wise simply because the rates are so high.However I have bought many properties as non-owner occupied using conventional loans. Usually the rates are a little higher (figure at least 1%, might be less) simply because it's more risk for the lender, but the rate will still be far below hard money rates and if you buy right, the property should still be able to cash flow.As far as funding so many projects at once, it's up to you, but I would say if this is all brand new to you, it might be good to take your time and "digest" the first property, handle any surprises and develop/test some systems, before you go right out and add more.Particularly with where we are in the market cycle (getting a little toppy, definitely in other areas of the country and to some extent here too), I wouldn't necessarily be in a rush to buy everything you can get your hands on as soon as possible.I think caution is warranted now, and if it were me, I would urge you to get your first property fully under your belt before you look for the next one. Particularly because you may find, as I have over the years, that real estate projects often take longer and cost more than you expect. (That definitely goes for rehabs, but also for repairs and maintenance, which often come up within the first 6-12 months of owning a new property.)

Josh Lemos · Answer

Hi Collette, I am a mortgage broker,

The "note" on your VA loan will specify how long you must occupy the property.  For a conventional loan it is 1 year.  However, there is language in the note which covers extenuating circumstances.  Typically extenuating circumstances are company/job relocation or health or family concerns.

If you are looking to purchase a non owner occupied 2-4 unit property you will need to put down 25% for any "conventional" loan.  You cannot buy a non owner home using a VA or FHA loan.  For a SFR/Condo you can put 15% down.

Hard money/private money lenders will rarely lend with less than 25% down on an investment property.  A good Alt-A lender is Citadel Servicing Corporation if you want to Google them.  Angel Oaks is another big Alt A plays.

Brett Read · Answer

@Collette Douglas

Answers:

1. The best thing to do would be to consult a lender who specializes in VA loans. I have a great contact who helped one of my clients, if you need one. While there can be exceptions, I know you must occupy the property within 60 days. I’m not sure if you have to occupy for a certain length of time.

2. Best option for second purchase depends on many factors. If for some reason traditional financing isn’t an option, maybe due to DTI limitations, private financing may be your only option. Finding a conventional loan for a multi that isn’t owner occupied won’t be difficult but investment loans will require 20% or more down and probably some reserves depending on the size of the property.

3. Personally I prefer to tackle one project at a time, but if you have the bandwidth and resources to take down two purchases at once then by all means. Exploring your options and making attempts will only increase your understanding of how the investing world works. You’ll most likely make important contacts along the way as well.

Brett Read · Answer

@Collette Douglas I’m not aware of any low down payment products that don’t require owner occupancy and I wouldn’t recommend failing to fulfill the owner occupancy requirements of your loan. Mortgage fraud is no joke.

Pricing for multifamily and housing in general in East Bay can be steep but as long as you buy right and manage right there is still money to be made.

If you have any specific questions regarding investing in RI please let me know.

Shaun Futch · Answer

As everyone has said look toward your next PCS as the house hack multi-family utilizing VA.

I would warn you that trying to close on multiple properties at the same general time is a nightmare as I have tried this on multiple occasions.  It isn't about whether the debt to income is there or the fact that you have plenty of money or collateral, it is just the issue of the banks wanting to kick everything back over and over as they find issues with your simultaneous purchase situation.  Their job is to minimize their risk so every red flag goes up as you are working two deals at once on where your risk mitigation lies, with them or the other lender to the other property.  Just wait till one is closed before starting the next process (doesn't mean you can't start shopping for both, just don't try to process the mortgages and closings at the same time).

For the property at your home town area where you are wanting to invest I would suggest looking at HUD or VA foreclosures as both provide mortgage opportunities for investors that don't plan on living in the property.

Adam L. · Answer

Hello, @Collette Douglas. My partners and I run a company called Active Duty Passive Income and we work hard with a lot of our folks on working through problems like this. We even wrote a book called Military House Hacking which can tell you almost everything you need to know about what you are asking.

That being said, yes, you must be honest with the VA loan and not screw around with that. It seems you understand that, but just know that the wording is really that you "intend" to live in the house for a year. So when you are in RI you can get the plex and rent out all but yours and be good to go. I would HIGHLY recommend underwriting it so you can ensure you will cash-flow well with property management. You mentioned managing yourself and I would not recommend that while you are building your portfolio. Get someone to manage your property, even the one you are living in (and never tell the tenants you are the owner), and get rid of that headache. Investing is not changing toilets!

As for the house somewhere else, you can certainly use a traditional loan on those, but some banks will give you a hard time if you do not have much experience in that. I would suggest talking to a local bank in that area. Build the relationship and move the account for that property to that bank as well as getting the loan there. They will be more apt to help you with your needs when you have more than one service with them. Don't be afraid of getting multiple project running but certain make sure you have a strong team in place to take care of the problems when they arise!

Anyways, I hope that helps and I would love to help further if I can. Let me know!!!

Jaysen Medhurst · Answer

@Collette Douglas, since you clearly have a network on the ground in VA, out-of-state may be a good option there. I’d also recommend checking out the New London/Groton, CT area. It’s not far from where you’ll be and with EB’s recent hiring announcements, has good potential.

Frank Patalano · Answer

@Collette Douglas Add Warren, RI to your list as well. Just North of Bristol and same school district. Prices are slightly cheaper b/c Bristol has Roger Williams University.

Starting multifamily investment rental portfolio! VA LOAN??

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