Hello, everyone!
I currently own zero homes but I am cooking up this crazy plan.. and I need to know if it is actually crazy or a viable option, or to hear an entirely different perspective. I'm 100% open to suggestions and criticisms.
My husband and I are looking to purchase two properties with the VA loan over the course of the next 2-3 years. We would like one in the $150,000-180,000 range and one in the $220,000-240,000 range. The hypothetical plan is to buy the cheaper property first, live in for a year, refinance (IRRRL - I still don't completely understand this process) and then rent it out to my folks.
Here's my logic - please feel free to pick it apart, I would like to avoid making a $200k mistake.
They're both 62 year old with fixed pensions and about to be eligible for social security. They've been in their current house for ten years, paying $900 per month. I have watched them take care of any housing issues that came up (replacing A/C, sink repair, etc to keep their rent low). They treat their rental with great care, as if they own it. Their rent has recently been raised to $1200 with the stipulation that they will move out when my brother graduates college, in July of 2019. They were homeowners right before the bubble burst, on one of those nasty ARMs and filed bankruptcy. Obviously the experience left a bad taste in their mouth, but times change, and rent in their area is inflated to the point there is literally no where they can afford. I'm obviously incredibly worried about them, and I can see the brick wall coming in 2019. My dad has excellent credit, I'm not sure about my mom's. I don't know what they have in savings or if they could provide a down payment.
1) If I have the right perspective about this not being an 'investment' property, meaning no real cash flow, but they will be building equity into a place that my exit strategy would be to rent out or sell when they pass - is it still a terrible idea to rent to family?
2) Can you think of a different loan that they might be eligible for? I know FHA has as low as 3.5% down but it comes with PMI until they would hit the 20% equity mark (around $36,000 for what we're after). We need to keep their monthly payment around $900.
3) Should I just encourage them to buy their own house?
4) Should I encourage them to move to Illinois or somewhere cheaper (we're in Oregon)? Kind of a joke.. kind of not.
Any pointers would be much appreciated... I can say I am learning a lot from them about planning for the future. The future is coming whether you plan for it or not, sadly.
TLDR; I want to buy two houses with the VA home loan in the next 2-3 years and let my parents move into the first one and have them pay the mortgage.
