Hello Everyone , New to the Game , Ready to Make Things Happen

[Robert-Lee Pass]

Hello everyone , My name is Rob , I live and will be investing in Colorado Springs (Possibly Pueblo) I'm new to investing in real-estate but pretty well versed on investing in equities. I'm 36 years old , I served 2 Combat tours in Iraq under Operation Iraqi Freedom as well as Operation New Dawn, I'm currently medically retired at a rate of 100% with the VA. I have an absolutely amazing wife named Lauren who has given me 2 Perfect children ages 2 (Girl turns 2 in December) and 4, the boy turned 4 this past June.

     We are in a very unique and fortunate position to both be home during the day , we home-school our oldest (this is just the first year trying that) and the wife works overnight as a caregiver . this gives her the time at home with us on a daily basis. We recently purchased our first home in Fountain Colorado that we will apparently be "House Hacking"(didn't know that's what it was when we did it)

My current vision for our investing journey seems to be pointing me to the small multifamily space when i read what the numbers are telling me. We do have low six figures cash on hand ready to invest , our credit is awesome, our DTI is currently only 31 and we are using the VA product allowing for that remaining entitlement benefit for the down payment help. So overall All systems are go and all lights are green.

     My Goal is Overall a long term appreciation play with some Cash Flow thrown in there to cover the Cap ex and daily repairs etc. When the 30 year term is up we will have the tap-able equity in the property along with the rents as 100% cash-flow after 60 years old if we don't pay it down faster

     Anyways, I'm just trying to put myself out there let everyone know who I am, what I'm about and what I'm trying to do.

As of today and what I'm doing to get to that next step, i have an active PropStream account, I'm finding properties that are listed and not listed on the MLS Using the comps to figure a sellers "List Price" on a theoretical property and then running that through the calculators. In doing this Ive noticed with the cost of homes in this county, the current rates, and locations i want to be at the math just doesn't pencil out for a single family . Even a 4-Plex wasn't penciling because the purchase price was so high. This is the reason I'm interested in going a little south to pueblo, where i can buy a new build duplex that saves on the Cap Ex , as well as commands that top tier rent. The price per square foot, the building size as well as the lot sizes are are bigger down there for a lower purchase price. I haven't run the Neighborhood scout report yet to see what is drawing the people to live there or where they work etc.

I am also looking to talk about the new 5% down Multifamily Owner Occupied Situation with Fanny Mae insuring it at 5% now? Am I hearing this right? that changes the game on initial purchase price for sure.

Thank you for your time,

- Rob

[Erik Browning]

Quote from @Robert-Lee Pass:

Or was the change nothing to do with insuring the loan? and It had to do with lowering the down payment of a multifamily from 15-25 down to 5%? for conventional. I just thought a 5% down conventional on an owner occupied was already a thing?

-- I'm researching now (that recent YouTube video " Game changing mortgage news  " live about 2 days ago) got me confused on what the actual change was. So now I'm just reading the actual printed changes.

Update - looks like we wouldn't have to worry about the self sustainability rule going conventional and the down payment was lowered from 15% (2units) 25% (3-4 Unit) down to 5% across the board and doesn't need to meet the self sustainability rule. Sound about right?

The change was that before the update, the requirement was (at minimum) 15% down. Now it's 5%. 

It's a regulation update by the Government Sponsored Entities (GSE's) that regulate us as lenders. They set rules, provide guidelines, and ensure we are compliant with the requirements that ensure folks have the ability to repay. Meaning borrowers have jobs and their income can support the monthly payment - they do this so we don't run into another financial meltdown.

These GSE's, Fannie Mae in this instance, understands that with the higher rate environment, it's tough for some folks to qualify for homes. As a result, they changed this guideline because people can use the prospective/current rents as qualifying income to help them qualify for a home when maybe they otherwise couldn't with a larger down payment.

I'm also a veteran and using your VA entitlement is the best option here if you're going to purchase either a new construction or already existing property.

It sounds like you dig into the details to understand what's available to you. Because of that, I recommend you check out Ch4 of the VA guidelines to understand how to calculate your projected rental income as well as what other requirements are necessary to get you going. They can be found HERE.

Do a CTRL+F for "rental income." Specifically, start reading from the header that says "Verification of Multi-Unit Property Securing the VA loan."

A few things to note when qualifying for the prospective rental income on the other units, you must have...  

Cash reserves totaling at least 6 months mortgage payments (PITI). [which is sounds like you do]

and 
the borrower has a reasonable likelihood of success as a landlord

Reasonable success as a landlord means 1 of 2 things. 1, you have 2 full years documented of being a landlord on your taxes. Or 2, the VA requires you hire a property manager to manage the property, while hitting you for the monthly obligation to the hired property manager.

Additionally,

The amount of rental income to include in effective income is based on 75 percent of the amount indicated on the lease or rental agreement unless a greater percentage can be documented. 

For example, If you are receiving $1000/mo in the other units on the prospective property, $750/mo can be used as qualifying income.

As a veteran that has used the VA loan myself and also quit my old job to become a lender to show other vets how to also, getting into a home using your VA loan is really a great tool in your toolbelt while you pursue other real estate methods of obtaining property. While you are maximizing your VA loan to get up to 4 (or more) homes, you can also pursue off market properties like you are mentioning to build your portfolio. I do recommend that folks fully understand how to maximize their VA entitlement to their advantage while pursuing other forms of investing. If you click on my profile, I've written about it a handful of times because this question (about having more than 1 VA loan at a time) gets asked pretty frequently.

Welcome to the club, Rob. We wish you luck and feel free to join us over a the Military Investing Forum. Best.