All Forum Posts by: Austin Williams

Yes, you can convert the VA to an investment property and buy another one. Basically, if your first home was purchased for $194K, you probably have VA eligibility for up to another $600kish home. (Fuzzy math--would need to see the details, all the other disclaimers...)

You can use a rental agreement to offset the payment of the home you are departing for underwriting purposes on the new purchase loan. You will need 6 months worth of the payment (including taxes, insurance, HOA) in liquid assets to show an underwriter.

In this case, I would recommend investigating a HELOC for a few reasons:

1. VA Cash Out refi's must demonstrate a Net Tangible Benefit to the veteran, strictly defined by VA, to do one of the following: eliminate PMI, reduce the rate, reduce the term, reduce the payment, increase residual income, renovate or repair your primary residence, convert from ARM to fixed rate, or stay below 90% LTV. (That last one might qualify for what you are trying to do, but you're going to run into some underwriting barriers if you simultaneously increase the rate and payment without a very strong reason--and accessing cash for real estate investment is probably not going to be what they want to see, depending on the lender).

2. Depending on your current rate, it might be beneficial not to refi into a higher rate first mortgage.

3. The HELOC is reusable--you can pay it down and run it back up. I know of an FCU here in SC that will go up to 100% CLTV (First mortgage plus HELOC limit can go to 100% of your appraised value.) Rates are higher, but if your goal is to BRRRR and recoup the funds, that might be acceptable to you for the first few rinse and repeats.

What is your current rate?  In 2021 it should have been pretty good.   

How much can you rent your current house for?  What is the payment?  

What is the house worth and what do you owe on it? 

Are you willing to move or do you want to stay in the house?

I think that will help everyone give you better advice. 

@Austin Williams - Leveraging a VA loan for a house hack is such low-hanging fruit for financial freedom. Naturally, a VA loan is an owner-occupied loan, so you do have to live in the property. If you're trying to utilize it without living there, that's simply not possible. Nonetheless, I highly recommend just sucking it up and moving into a property with a VA loan. It's an incredibly powerful way to get cash-flowing assets under your name with little to no funds out of pocket.

Trying to use it without being an owner-occupant is equivalent to wanting to have your cake and eat it too. Building wealth quickly is not an enjoyable experience—you have to go through some pain to experience the reward at the end.

Trust me, from personal experience: the quicker the wealth building = the more pain. That pain could take the form of working long hours, putting other aspects of your life aside for business, or uprooting your entire life for a short period to escape the rat race. It sure isn’t easy, but it’s definitely worth it once you make it there.

@Matthew Becker has a good point--stating your goal may help you get more specific and accurate advice.  

That said, a VA loan charges you a guarantee fee that is financed into the loan. With that much equity, you should compare rates with a conventional loan (no PMI but potentially higher interest rate) to see if the difference in rate would make sense vs the G-fee. This would depend on loan purpose and how long you plan to hold it. Also, if you think rates are coming down and a future refi is part of your strategy, then it's easier and cheaper to refi VA to VA.

VA loan is no different then any other loan. What are you trying to accomplish. Can you be a bit more specific.

I mean the assessed values mean nothing. Sometimes you might need to offer 100% over the assessed value. Sometimes you might be able to get the, below assessed value. You’re going to have to comb through 10’s if not 100’s of previous sales in the last 2-3 months of nearly identical properties to get an idea of what your target properties are worth. Probably the best thing you could do is go work for a wholesaler for 6+ months. Currently you’re essentially a peewee football kid asking the coach how to run circles around the professional defense. 

If you tell a wholesaler the zip code, the SF, the bed/bath and condition they should have a ballpark in their head instantly. MAYBE they adjust that up or down 10% depending on outside factors but they’re not checking the assessed value. 

Ps. I HOPE you misread the advice saying to offer 75-80% below asking price. I HOPE they meant 75-8o% OF asking price. (20-25% off). But even that doesn’t guaranteed a deal. They could be asking 20% too much. 

Pps. Wholesalers can literally pay THE LEAST for any property. You have to find a property that isn’t for sale or nobody knows is for sale, or is in unlivable condition.  Imagine a home “the market” thinks is worth $100k. You think you’re going to offer $30k or maybe $70k (if you misread the 70% off part of the bad advice you were given.). While the long term hold landlord would love to offer $85k. And the Short Term landlord might offer $95k-$105k because they’re going to make more income. But then in walks the owner occupant or the house hacker who “love the house” or the neighborhoods or the school district. And they offer $110k, or $120k.  You will literally never get one offer accepted. (I was going to say except for the person who NEEDS to sell today. But you aren’t really a buyer, you can’t buy today. You can only promise to go look for a buyer.)

Wholesaling is often sold as the easy way to get started. It is not. It is the cheap way to get started. As long as you don’t count all the hours you work for free that you could have been earning money and learning. I truly wish you good luck, but please be ready to pivot to something else.