How do i scale with rental properties without using BRRR at first

Question

So, i am am 22 and im using my VA loan to buy my first property in the next at most 3 months. It is a 7 unit and should be getting me some very nice cash flow right away approximately $1300 on the low end to about $2000 on the high. So, for my question above how should i go about doing this. I want to scale in real estate and not just have one property for the next 4 years. I know that i have to use this property as my primary residence for a year and thats ok. But after securring the property what should i do in order to scale. I would love to use the BRRR strategy but I have fear about not having the capital to fund rehabs myself as well as putting down the down payments for hard money lenders. I know occupying one of the units in my soon to be property will help me save up money quickly but Im curious what you all have to say. Thank you for the help and look forward to conversing with you!!!

Erik Browning · Answer

Hi @Jahshim Snyder it might be a good idea to speak with an expert VA loan specialist about your plans. Like @Joel Allen mentioned, you cannot obtain a 7-unit building using your VA loan as a sole buyer unfortunately. The maximum amount of units a sole VA buyer/investor can obtain is 4 units, however if you have another VA borrower on the loan, you both can get an additional unit - totaling 5.

I recommend you do a handful of things prior to even starting, because it appears you may be misinformed on how to use this financial product:

- speak with a mortgage broker that specializes in VA loans to see what will make you eligible and what you are capable of purchasing.

- speak with a mortgage broker that works with investors and has experience with active duty and veterans that use their VA loan to make purchases.

- save your money until you are fully aware of how you plan on investing and that you understand how the VA loan works as well as how to invest in real estate. You are not ready yet.

- listen to the BP podcast and read Brandon Turner's "The Book on Investing in Real Estate with No (and Low) Money Down." Understand this fully before jumping into a deal that doesn't make sense.

Feel free to send a DM if you have other questions

Joel Allen · Answer

@Jahshim Snyder

You’re right about the primary residence requirement, but VA loans can only be used for 1-4 unit properties.  Your post mentioned that you’re planning to purchase a 7-unit with your VA loan.

If you want to pursue the 7-unit, you want to discuss with a lender to see what commercial financing options may be available to you.

Mike Klarman · Answer

Hard Money Lenders will give you the rehab funds in the loan.  If you don't have experience then you'll lay out 20% of the purchase price, but once you get a combo of holds/flips that = 3 then you'll get 90% of the purchase and that's when you can ramp up and either buy two at at time or work in a higher as-is value.

Thank you for your service!

Andrew Syrios · Answer

Using a VA or FHA loan is a great way to start and you don't necessarily need to BRRRR them. But you could also flip or wholesale (or work a job or be an agent) to gain money for downpayments on investment properties. You could also partner with people who have money. But that being said, you should always be looking for some sort of equity margin. You shouldn't be buying at market. Just by getting a margin of some sort you are sort of BRRRRing if you go on to hold the property.

Andrew Garcia · Answer

Hi @Jahshim Snyder, typically the front-end loan will cover the purchase price + rehab.

For example, if the loan requires 15% down and you are buying a $250k house with $50k rehab, your down payment would be $45k with a loan amount of $255k.

However, if you do not want to use the BRRRR method, house hacking is a great way to scale.

Additionally, as the others have said, VA loans can only be used on 1-4 unit properties.

I hope this helps! Let me know if I can be of any assistance.

How do i scale with rental properties without using BRRR at first

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