How to Start Investing when already using VA loan

Question

I am looking to use a VA loan to get a house but want to purchase a rental property and get started on getting cashflow. I am very new to this but have read about half of The Book on Rental Property Investing. I have some debt I am paying off quickly (avalanche) and am wondering if I should try to get two loans, one from VA for my house and the other traditional for a rental property spread out over time while I'm paying this debt off, or wait a few years and be much more debt free. Can I get some advice on military friendly lenders with low down payment for purchasing rental property without using the VA loan or in general, how to navigate this to start my rental property real estate journey?

Luis Rincon · Answer

Thanks all, this was very helpful. New to bigger Pockets as well.

Sean Hudgins · Answer

I know someone else mentioned house hacking, but it sounds like your family is not going to be down with that strategy... My family is the same way, so I get it.

The next suggestion I go for is a live-in flip. Use your VA loan to get a primary residence that needs some love, find something that requires primarily cosmetic work, get your hands dirty, and make it a gem. The beauty of this is you have a couple of great exit strategies when you're done.

1. Live in it for two years and sell at the end of the two years, freeing up more of your VA eligibility to buy the next one. You also avoid the capital gains tax by living in it for two years. Now you have cash to put down on a rental property conventional loan, and you can go and grab the next live-in flip with the VA loan.

2. after six months to a year, move to the next property, where you can use the remaining balance on your VA eligibility to acquire and rent out the first property. Then rinse and repeat the process until you are out of VA eligibility and refi the first property into a conventional mortgage.

The key here is that you need to add that sweat equity to the properties, providing a cushion for market fluctuations and increasing the rental potential for each home. I will echo the others. You should just get started; don't get into analysis paralysis trying to find the perfect strategy.

The only downside here is that you will be doing a lot of moving, so make sure the family is on board, or else after the second move, you may be spending all your profits on a marriage counselor... just kidding.

Carlos Scarpero · Answer

You can do it either way. You could buy a new house on VA and rent out the departing residence. You also could buy a multi-family in VA and rent out the additional spaces.Keep in mind that VA is for primary residence only.You could just go straight up investment but that is a much more expensive proposition.As for a lender, I have a lot of experience in this area. Feel free to reach out.

Michael Behr · Answer

I wish I would of know about having 2 VA loans at once.

Jay Thomas · Answer

Great to hear about your interest in rental property investment! Prioritize paying off existing debt to improve your debt-to-income ratio for better loan terms. While VA loans are excellent for primary residences, conventional loans are better for investments. Military-friendly lenders like Navy Federal, USAA, PenFed, Veterans United, and Freedom Mortgage offer conventional loans with low down payments (starting at 3%). Compare rates, fees, and customer service when choosing a lender. Conduct thorough research on potential properties, considering location, condition, rental potential, and maintenance costs. Seek advice from experienced investors and a qualified real estate agent for informed decisions. Remember, success in rental property investment requires planning, financial discipline, and market understanding.

Jaron Walling · Answer

Because you'll have no equity?... If (big if) the market goes down you'll be underwater with the property. That's a dangerous territory. Never go under water. Never leverage so far you can't come back. Always have some reserves.

Don't wait a few years. The best time to buy was yesterday. If you have stable income, good credit, and an emergency fund get in the game.

If the FED reduces the prime rate RE prices are going up. The masses will roll out and multiple bids over ask will come back. You'll see it in the news and want-a-be buyers will complain. They will say I should have buckled down a bought property last year, or the year before that, or before that.

Anthony Jacques · Answer

I don't think house hacking, at this point due to my family situation would be the best idea but I appreciate the idea! Regarding the other types of loans, based on your explanation the conventional loan seems to (on average) have a lower down payment but takes into account the normal loan factors whereas the debt service loan doesn't but with a slightly higher down payment, proof of income generation through the property, and never being able to live in it. A few questions on that 1. Can I occupy the property if, say 20 years down the line I manage to pay off the loan (regarding debt service loan)?2. Can I occupy the home using a conventional loan at any point?3. This one is a bit more involved and I might make a separate post to get more feedback:Let's say before I purchase any house, I have a combined DTI with my wife of 13% (Assuming gross income is used to calculate DTI). Let's say we use our combined income to then purchase a property we will live in and NOT rent out for at minimum 4 years, potentially 8. Our DTI is now 32%. Now in this scenario I may have maybe $10K to $20K for both a down payment (on an actual rental property which I will rent out) and repair/CapEx/Vacancy costs. I can either A) Attempt to get a loan with that amount of money, with a 32% DTI OR  B) Drop my combined DTI to 22% and having about $50K but this would mean waiting until 2029. Overall question: is it worth to start now and get into the game or wait a few years?

Anthony Jacques · Answer

Okay that makes sense. Yeah I was tracking that VA could only be used for live-in properties. Can you explain your analysis regarding why 0% down is risky in today's market?

Brittany Minocchi · Answer

Hey @Anthony Jacques, it'll all depend on what your DTI can handle. You can use the VA loan for your primary but wouldn't be able to use it for an investment, unless it were a multi-unit you planned to house hack. That would be your best bet to kind of get the best of both worlds. Live in for a year, then move and rent out the unit you were occupying. Another option if you don't plan to occupy would be to get a conventional investment loan. This would require at least 15% down, more for a multifamily property. Income, employment history and DTI would all be evaluated. You cannot close in an LLC.

If you go with something like a debt service loan, none of those are factored in and you can close in an LLC. You cannot occupy the property at any point, it's strictly a business purpose loan. The lender will want to see that the income generated by the property can cover the monthly principal, interest, taxes, insurance and HOA (if applicable). Plan on at least 20% down.

Hope that helps! Happy to answer any other questions if you'd like to connect.

How to Start Investing when already using VA loan

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