Cleveland House hacking with VA benefits

[Brandon Metz]

Greetings Clevelanders im about 5 books into real estate investing and i am really starting to pick up some decent knowledge. Of course i am far from being well versed but i know enough to begin small action steps. im looking to House hack in the Cleveland area utilizing my VA benefits for a VA loan. I figured i can start sooner than later with the 0% down option. I always see posts about 5% being the magic number for VA loans though but i can never find an explanation. Is there any other current veteran investors in the area that can shed some more light on the full potentials of VA home loans i feel i am only scraping the surface. i get the main points of

0% money down required

no PMI required

lower rates

lower closing costs

1-4 units max if purchasing multi-tenant

and current VA loan limit is just over 400,000

Any advice here would be appreciated and of course id love to start surrounding myself with other local investors because after all doing this alone is foolish. especially in the beginning.

[James Wise]

Originally posted by @Brandon Metz:

Greetings Clevelanders im about 5 books into real estate investing and i am really starting to pick up some decent knowledge. Of course i am far from being well versed but i know enough to begin small action steps. im looking to House hack in the Cleveland area utilizing my VA benefits for a VA loan. I figured i can start sooner than later with the 0% down option. I always see posts about 5% being the magic number for VA loans though but i can never find an explanation. Is there any other current veteran investors in the area that can shed some more light on the full potentials of VA home loans i feel i am only scraping the surface. i get the main points of

0% money down required

no PMI required

lower rates

lower closing costs

1-4 units max if purchasing multi-tenant

and current VA loan limit is just over 400,000

Any advice here would be appreciated and of course id love to start surrounding myself with other local investors because after all doing this alone is foolish. especially in the beginning.

Welcome to the site Brandon. You're on the right track, I got started in a similar fashion. I am not a veteran though, so when I got my start in 2009 it was an FHA house hack in the Cleveland area (Parma). What attracted me to this was the terms of the loan which are somewhat similar to the VA expect not as attractive as the down payment is 3.5% as opposed to 0%. You earned it though so get out there and put that awesome financing to use my man.

[Brandon Metz]

@James Wise thanks for the motivation it's great to here from someone with more experience that I'm starting out on the right path

[Kevin Co]

@Brandon Metz if you are looking at multi unit buildings VA loans will increase depending on the number of units and depending on the county - for Cuyahoga county - single family home is up to $453k, duplex $580k, triplex $700k, and 4unit $871k. Keep in mind all of the same debt to income and other financial factors come into play for the loan itself as they would with a regular FHA loan so you need to show that you can still cover these costs and the building needs to be move in ready and meet some other standards for the loan to be approved. Note - the numbers above are the max for that county for a VA loan but the house has to qualify as well so although that's the max loan you may only qualify or the house may only qualify for a certain amount that is less than that max number. Also consider that you need to live in the property for a certain number of years and you can't get a rehab loan on top of the VA loan..there's quite a bit that goes into it

You also need to get your Certificate of Eligibility before applying for the loan

Link to the max loan amounts per county - https://www.fhfa.gov/DataTools/Downloads/Documents/Conforming-Loan-Limits/FullCountyLoanLimitList2018_HERA-BASED_FINAL_FLAT.PDF


There's a ton of info here as well - https://www.benefits.va.gov/homeloans/

[Brandon Metz]

Awesome i got my certificate already so that's good. I guess the hardest part is figuring out how much credit and DTI help you. I always see posts about the bare minimum score of 620 but never anything about if you have a very high credit score. I currently sit at 790 credit score and i use Mint from intuit to track my DTI. I sit right at the target 36% but i believe i might be less seeing that i switched jobs this year and almost doubled my pay so the data is a little off there. Does having better credit and DTI do anything more for you if its significantly about the minimum threshold.

[Victor Vella]

Thank you for your service Brandon! As a former mortgage originator and current REI I agree the VA loan is a tremendous asset!!!

Where are you looking do you have it narrowed down to a city/cities? 

Also yes when certain thresholds are not as high others get impacted - however its probably just an added “risk cost” not a matter of approval.
  

[Brandon Metz]

I'm looking very closely at a few up and coming Cleveland neighborhoods and currently eyeing a few properties worth a second look or a numbers crunch. I'm trying a get a 4 unit property if I can but there's not too many around.ive found 2vin the Detroit shoreway area. I'm trying to gather more neighborhood data first to see if the numbers can check out

[Don Petrasek]

@Brandon Metz have you talked to a mortgage loan officer yet?  With that much of an increase in pay and your credit score, switching jobs may not impact you especially if you stayed in the same line of work.  I have a couple of good mortgage guys that I work with, one if particular understands the investor mindset....PM me if you want their contact info.  

[Ryan Evans]

If you can find a fourplex, that would be ideal but everyone wants them so you won't be very competitive with a VA loan as you'll likely be competing with cash offers. That said, if you can find a nice double in Edgewater, Lakewood, etc., and get it for free, then you're off to a great start!

Since you won't be out of pocket much you could find a double where you could add a couple of bedrooms on the third floor. That can give you a nice little value add and a rent raise for the upper unit. 

[Brandon Metz]

@Ryan Evans thanks for the advice. luckily finding multi tenant property around there isn't a problem. I guess i just have to act faster. i Seen a potential ideal property go up on the market Friday and its already pending today :(.

[Brandon Metz]

@Don Petrasek I haven't talked to anyone in great depth yet because id like to finish the current book im on due to how well the information has treated me. But ill PM you for the contact info. I need to do as much networking as possible.

[Andrew Kelly]

Hi all, 

I am also looking for an investment property in the Cleveland area. I have been pre approved, and have a few properties on my radar. Like Brandon I will be using my VA loan. Any suggestions on neighborhoods?

[Robert Matelski]

Originally posted by @Andrew Kelly:

Hi all, 

I am also looking for an investment property in the Cleveland area. I have been pre approved, and have a few properties on my radar. Like Brandon I will be using my VA loan. Any suggestions on neighborhoods?

A few areas that could be good for a VA duplex as your first investment would be Euclid, Lakewood, Cleveland Heights, Parma or Garfield Heights. Could also consider some Cleveland neighborhoods with a 'C' grade, such as some parts of Old Brooklyn or North Collinwood.

I've created a comprehensive Area Guide with dashboards on the most common areas (neighborhoods and suburbs) for investing in the Cleveland area -- it includes grades for each census tract (objectively scored, only using publicly available data, and with a fully documented methodology). It's considerably more thorough than the other grading maps and guides out there (most of which were created by brokers) -- this should help you see the full picture of the areas on your radar... https://www.clevelandinvestorprimer.com/area-guide/

[Jerry Padilla]

@Brandon Metz

One thing to keep in mind with VA, if if you don't have a 2 year history of being a landlord then you will have to qualify on your own income for the mortgage - with a multi-family residence.

This is one of the big difference with FHA. As FHA will allow you to use 75% of potential rental income on the other units, to help qualify for the loan.

[Brandon Metz]

ive been doing a lot of looking around those neighborhoods which is a good thing I must be on the right track. From what I see though its looks very hard at least from my numbers crunch to cash flow even $100. I guess the real money comes from the so called living for free aspect where im no longer paying $800 in rent for my current apartment and move out to another property with another VA loan after I refinance next year. from other house hacker experience would you other hackers say its common for a bare minimum cash flow until you move to the next property. Since i dont have my first property yet its harder to put things into reality in my head of what i should truly expect. Everyone knows its bad to be int he red on a property, but exactly how much in the green should i be looking to be.

[Ryan Evans]

I don't think you should be all that concerned with your immediate cash flow when you're living in the place. If you're living for free, that's your cash flow. If your monthly living expenses go to zero, that's not much different than making 800 in cash flow and renting. Of course, there are other factors influencing those numbers, but that's the simple version. 

If you can break even year one then when it comes time to move your numbers will look really good. Sure, some expenses might go up like your utility bills, maintenance (if you're doing it yourself while you live there), etc., but you might be cash flowing $500 which is good no matter how you look at it. 

If you're planning on refinancing to something more conventional you're most likely going to need 20-25% equity. Which means you're going to need to do a significant value add or come up with a chunk of cash. 

[Brandon Metz]

Okay that's what I was thinking even if I great reduce my expenses by a couple hundred dollars from the $800 I'm currently paying for a 2 bedroom apartment then I still come out on top in terms of money saved