VA and Commercial Loans for MTR/STR Strategy

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VA and Commercial Loans for MTR/STR Strategy

Cali K.
Southern Pines, NC · Member since 2021 · 9 posts · 1 vote

Hello everyone!

Newbie here. I am planning on converting my current home to a midterm rental (it's in a small town but a large hospital system nearby). I am confident it will rent well.

I need to move to Milwaukee for a few months. Instead of paying the crazy high rent prices for such a short stay, I was considering using a conventional loan to purchase a condo in the 3rd ward area and furnishing it while i lived there. When I move out, I plan to also convert that to an MTR as I understand there's a lot of med students and travel nurses in the area.

I also want to use my remaining VA loan to purchase a beach vacation home this spring/summer. I know with VA loans I have to use it as a primary residence for at least a year, but was then wanting to convert that into a STR. (Kind of house hacking? )

My questions to you all are:
1. Does this seem like a realistic plan?
2. Will getting a conventional loan now hurt my rate for a VA loan a little later this year?
3. Has anybody done anything similar and have any advice for me?

Thank you!

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Luke CarlPro Member
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
3y

To my knowledge VA and Rental in the same sentence is a big no-no

Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
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  • Luke CarlPro Member
    Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
    3y

    To my knowledge VA and Rental in the same sentence is a big no-no

    Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
    1Reply
  • Cali K.
    OP
    Southern Pines, NC · Member since 2021 · 9 posts · 1 vote
    3y

    Hi @Luke Carl thanks for the quick reply. My understanding is that I can rent out my home as long as I have lived in it as my primary residence for at least 12 months and I can rent out rooms or guest apartments as long as I am still using a portion of the property as my primary.

    0Reply
  • Brooklyn McCarty
    Investor · Member since 2022 · 1k+ posts · 754 votes
    3y

    If you use a VA loan I think you have to occupy the property for X amount of time

    0Reply
  • Travis Hill
    Investor · Multiple · Member since 2019 · 175 posts · 150 votes
    3y
    Quote from @Cali K.:

    Hello everyone!

    Newbie here. I am planning on converting my current home to a midterm rental (it's in a small town but a large hospital system nearby). I am confident it will rent well.

    I need to move to Milwaukee for a few months. Instead of paying the crazy high rent prices for such a short stay, I was considering using a conventional loan to purchase a condo in the 3rd ward area and furnishing it while i lived there. When I move out, I plan to also convert that to an MTR as I understand there's a lot of med students and travel nurses in the area.

    I also want to use my remaining VA loan to purchase a beach vacation home this spring/summer. I know with VA loans I have to use it as a primary residence for at least a year, but was then wanting to convert that into a STR. (Kind of house hacking? )

    My questions to you all are:
    1. Does this seem like a realistic plan?
    2. Will getting a conventional loan now hurt my rate for a VA loan a little later this year?
    3. Has anybody done anything similar and have any advice for me?

    Thank you!


     Be aware of maxing out your allowance. Making sure you do not go over that is critical. 

    0Reply
  • Michael BaumPro Member
    Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
    3y

    Hey @Cali K., here is an article that discusses VA loans and renting - https://veteran.com/renting-va...

    Before you buy in Milwaukee, make sure there aren't any regulations around what you are planning to do. Especially the HOA of the condo complex. They might not allow student housing.

    0Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    3y

    @Cali K. great condos in the Third Ward, but they won't let you do MTR or STR. And in general they won't de great for LTR financially either. That does not mean your plan won't work at all.

    If you want to target travelling nurses I'd look in Wauwatosa or West Allis, get a SF or duplex. The latter has the advantage that you can maintain residence in one half. There are also better low down options than VA. If you want to learn more about Wauwatosa, look up my video about it on YouTube!

    1Reply
  • Stephanie Walker
    Realtor · Charlotte, NC · Member since 2023 · 245 posts · 231 votes
    3y

    I'd tread carefully with the use of the VA for a few reasons:

    1. You must intend to live there for at least a year. I wouldn’t be completely surprised if the underwriter required a letter from your employer stating how long you will be expected to stay there. If your employer says you need to be there for X amount of time then remote, you’re okay. As long as you can actually live there for a year. 
    2. Eligibility. Make sure you don’t go over your eligibility and if you do, make sure you can cover the 25% required for the gap.
    3. If eligibility isn't an issue now, will it be an issue when you go to purchase a 3rd home? It might be best to go the conventional route now than to buy with your VA and end up needing to refinance out of it to use it on your newest personal residence.

    Have you looked into a second home loan? You’ll be required to stay in it X amount of days per year but that’s fairly easy to do and keeps your down payment low. 

    Disclaimer: I'm not a lender but I've closed several VA loans with my buyer clients, have my MRP Certification and have used VA for our personal homes.

    0Reply
  • Cali K.
    OP
    Southern Pines, NC · Member since 2021 · 9 posts · 1 vote
    3y

    Thank you all for the recommendations, I will dig into this more! Thanks!

    0Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    3y
    Quote from @Cali K.:

    Hello everyone!

    Newbie here. I am planning on converting my current home to a midterm rental (it's in a small town but a large hospital system nearby). I am confident it will rent well.

    I need to move to Milwaukee for a few months. Instead of paying the crazy high rent prices for such a short stay, I was considering using a conventional loan to purchase a condo in the 3rd ward area and furnishing it while i lived there. When I move out, I plan to also convert that to an MTR as I understand there's a lot of med students and travel nurses in the area.

    I also want to use my remaining VA loan to purchase a beach vacation home this spring/summer. I know with VA loans I have to use it as a primary residence for at least a year, but was then wanting to convert that into a STR. (Kind of house hacking? )

    My questions to you all are:
    1. Does this seem like a realistic plan?
    2. Will getting a conventional loan now hurt my rate for a VA loan a little later this year?
    3. Has anybody done anything similar and have any advice for me?

    Thank you!

     HI Cali,

    1) realistic, depends if you can live there long enough to satisfy the commitments you signed on the dotted line for. VA requires owner occupancy intent and living there 12 + months (have people left earlier sure they got PCS'd out to another base or had another emergency so sure it happens legitly but for most of us, we should follow the guidance).

    2) Getting a conventional loan now will or can count against you yes because of your DTI or debt to income right? So make sure you get your DTI assessed at this moment, your DTI or what it will be when you're about to purchase, and also what your DTI will be after you have already acquired the property so that you can plan. If you dont know where your borrowing power will be at any given time then it will make investing a bit more frustrating.

    Once you purchase with conventional first and are going for your VA loan, you might be hit with both monthly PITIA (prin/int/taxes/insurance/assessments) payments in your qualification. In this case most people rent out the conventional loan on a long term lease to attempt to offset their conventional loan's PITIA payment so that they can qualify for the VA loan. The VA allows for it yes but you gotta plan for it unless if your income is so high that its an afterthought in which case you can just take both payments and move forward still.

    The worst is thinking you can qualify but not knowing and trying to make real estate investing decisions because what you sign for on real estate contracts may contradict what the lender is able to provide. 

    3) Id plan out your current debt to income or borrowing ability at this moment first then look for what that proposed property in WI will cost to see how it will affect my ability to qualify before and after I acquired it. This would give you good mental runway on how to proceed and confidence when talking to agents and sellers.

    Best of Luck,

    @Carlos Valencia

    @Matthew Kwan

    1Reply
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