Real Estate Deal Analysis & Advice
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback
Updated almost 4 years ago,
Using VA Loan to House hack New Const. with Negative CF
I'm looking for thoughts on a house hacking idea with new construction.
Situation: My partner and I both qualify for VA Loans and both have 6-figure jobs. We are moving to the Las Vegas area and want to start in real estate with the goal of cash flow/equity when we retire. Cash Flow in the present isn't really a concern given the steady salaries as long as it's not a huge negative number.
"Deal": The Las Vegas market has a lot of new construction townhomes being built. My idea was to buy 3 new construction townhomes that together make up a single structure and house hack it as a triplex. I would need the builder to sell the structure as a single deed (a potential sticking point).
Pros:
- New construction so builders warranty applies to certain things and very limited maintenance for first 5 years if not 10.
- Use VA Loan to leverage into a $700k property at no down payment, just closing fees and VA Funding fee(which is wrapped into the loan).
- Can Self manage the first 3-5 years until new assignment saving that money.
- Can pick durable materials upfront to eliminate long term maintenance costs.
Cons:
- Negative cash flow
- Highly leveraged if market drops(not planning to sell as goal is equity at retirement)
- Self Manage for a few years
First year Numbers While living in it and self-managing:
- $700,000 Loan, 0% down using VA Loan
- Rent 2 units: $2700, 2/2 -$1200 & 3/2 – $1500
- P&I – $2876
- Tax/Ins – $750
- Vacancy(10%) – $460
- Maint(~5%) – $200
- Management(0%) – $0 - Self Manage while living in
- Cost to Live in remaining 3/2 unit :$1,586
5th year Numbers as a triplex rental
- Rent 3 units: $4600, 2/2 -$1300 & (2) 3/2 – $1650
- P&I – $2876
- Tax/Ins – $750
- Vacancy(10%) – $460
- Maint(10%) – $460
- Management(10%) – $460
- Cash Flow: $-405
I see the upside of building approx. $20k+/year in equity(depending on appreciation) for essentially $0 money down even with a negative cash flow. Keeping in mind that the "why" is to have cash flow/equity in 25-30 years when I retire.