Buying my 2nd place. What should I be aware of?

[Brandon Espino]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $270,000

6 bedroom, 2 bathroom ~2100 square foot home in eastern Colorado Springs. I'm going to be house hacking and renovating this place starting with putting in an additional bathroom.

What made you interested in investing in this type of deal?

What made me interested in this property was that it has 6 bedrooms. I figure that I could rent out each room for $600 (after I install an additional bathroom) and hold on to the property for a couple of years.

How did you finance this deal?

VA Loan

[Seth Wilcock]

Hi @Brandon Espino - That's an incredible househack!  Great job & great deal!  Also, thank you for your service!

Since you're using VA financing on your 2nd home, you should be aware that if you're planning on using rental income from your first house (I assume is a house hack), your lender won't give you excess qualifying income for the additional rent from the vacated house on VA financing. For example, if your mortgage payment on house 1 is $1,800/mo and you're renting out the home for $2,400/mo, you don't get to add the additional $600/mo to your income as qualifying income to help you qualify for the new house. You'll only be able to offset the $1,800/mo housing expense with the rent income you're generating. This is a VA rule, and only applies when vacating a residence and using rental income to offset the payment.

Lastly, if you did VA financing on the first home and you're not planning on selling the home to free up your VA entitlement, make sure your lender has performed the bonus entitlement calculation to find out how much you can finance without a down payment. If your loan amount exceeds the bonus entitlement calculation, you may end up needing a down payment. If you're a non-exempt veteran, you would have to pay a subsequent funding fee charge on the new home. You can reduce the subsequent use funding fee with a 5% or 10% down payment.