All Forum Posts by: Christopher Beasley

I am using my VA loan to purchase my first 2 properties. I'll be using my whole entitlement of $675k (based on my location), so one house will be 320K and the second will be about $320K. I plan on buying the first this year, buying the second in 2 years. I will rent the first one. Because its 0% down the PITI and the rent are about the same. I read in a book don't buy houses just for appreciation, but this is kind of what I have to do with my first 2 houses from the VA. I'd like to give them 6 or 7 years and sell them and take their combined equity and purchase my forever home at a mortgage I can afford within 25% of my income. Is this a bad plan?

1 Vote

Oklahoma City, Oklahoma

Quote from @Erik Browning:

Quote from @Christopher Beasley:

Quote from @Erik Browning:

@Christopher Beasley

Ok, a lot to unpack here.

First, I need to understand this completely: When you say you are $600 in debt, do you mean $600/month? Meaning the $1976 mortgage payment + $600/month in debts are approximately 35% of your monthly income, therefore making your DTI = 35% only including your primary lien + debts?

Second, are you saying that you still want to stay in the primary residence for another 4 years prior to purchasing a 2nd? If so, why are you getting preapproved right now?

Third, I'd make sure that you have enough remaining entitlement to move onto the 2nd home. Veterans United may not have checked your Certificate of eligibility, thus throttling your purchasing power.

Fourth, for VA loans only, it's OK to go past the 50% DTI ratio as long as you have enough of what is called "Residual Income." If you look in the VA guidelines, you are allowed to go past the 50% DTI threshold as long as you have enough cash left over each month. These are broken out by regions and the amount needed as Residual Income differs from place to place. Furthermore, you must add income taxes, state taxes, SS, and Medicare on top of that - as well as the NEW home's utilities, which is a function of the sq footage. If you have enough Residual Income left after that, your DTI can push higher than 50%. Feel free to schedule a call with me if you want to do an example, it's too much to type here. Also, I'm not licensed in OK so I won't try to sell you anything.

Fifth, for you departing residence the 75% of rental income is inaccurate. The guideline states you can only wash out the departing residence's mortgage, even if it's beyond 75%. Take a look for yourself with this excerpt from THE VA GUIDELINES:

"Use the prospective rental income only to offset the mortgage payment on the rental property, and only if there is not an indication that the property will be difficult to rent. This rental income may not be included in effective income.

Obtain a working knowledge of the local rental market. If there is not a lease on the property, but the local rental market is very strong, the lender may still consider the prospective rental income for offset purposes. Provide a justification on VA Form 26-6393, Loan Analysis.

Reserves are not needed to offset the mortgage payment on the property the Veteran occupies prior to the new loan."

Sixth, you're not stuck, you're just working with Veterans United (VU). VU is a corporate, retail bank with exceptional marketing. They have great content, however they have captive employees that do not receive a commission on each deal. As a result, they will not go the extra mile to work on a somewhat complex scenario, since yours does not fit into the typical cookie cutter box. I'd be happy to refer you to an expert VA broker that can not only beat VU in rate, but also give you a clear solution moving forward.

Lastly, none of these are tricks. This is all published openly to the public, it just takes a bit of creativity to fit all the pieces together.

You'll make this work.

I rent right now and other than rent I have only $600 in debt month. I am currently pursuing my first house for 330k, which with that mortgage would be what would put me at the 35% DTI.

second, the home I would want to stay in for 4 years would be the first property I purchase. So im preapproving to get that first property.

Third, based on my local area, i am entitled to $675k of VA backing.

4th I am looking for a property in edmond Oklahoma, so what are the requirements for that area to go over 50% DTI? Can I PM you all the necessary details to get a figure calculated? Are all lenders OK with going beyond 50% based on these factors or just some?

fifth I am assuming that means they will include the whole rental payment toward my income not just 75%? So if I am living in the first house, andove into the second one, and the first rentals rent is exactly thr PITI of the firat home, they will count that as a net sum of 0 toward debt and income? Is that a rule a lender would be more strict on? How long do I have to collect that rent before they consider it?

So while I am living in the first house, and trying to get preapproved to move into the second one to rent out the first one, as long as my Residual Income after the 2nd homes costs are going to be met they will let me borrow above the 50% DTI, then I could move into the second and start renting the 1st right? Or how would that work?

I'm happy to help out all veterans and active duty folks - I'm a veteran myself as well as a lender. This community is underserved, with regard to investing, and will certainly speak with you on clarifying this for your particular situation.

Do this please. Up-Vote and read some of my past posts, then send me a DM so we can take this offline. Your situation has a lot of moving parts and will take some time to explain as well as referencing the guidelines.

Request sent. I'm new to this website, so I think it was a DM, if you didn't get one can you DM me so I'll know we're connected?

0 Votes

Quote from @Erik Browning:

@Christopher Beasley

Ok, a lot to unpack here.

Second, are you saying that you still want to stay in the primary residence for another 4 years prior to purchasing a 2nd? If so, why are you getting preapproved right now?

Third, I'd make sure that you have enough remaining entitlement to move onto the 2nd home. Veterans United may not have checked your Certificate of eligibility, thus throttling your purchasing power.

Reserves are not needed to offset the mortgage payment on the property the Veteran occupies prior to the new loan."

Lastly, none of these are tricks. This is all published openly to the public, it just takes a bit of creativity to fit all the pieces together.

You'll make this work.

I rent right now and other than rent I have only $600 in debt month. I am currently pursuing my first house for 330k, which with that mortgage would be what would put me at the 35% DTI.

second, the home I would want to stay in for 4 years would be the first property I purchase. So im preapproving to get that first property.

Third, based on my local area, i am entitled to $675k of VA backing.

0 Votes

I am pre-approved for $350k. I am using a VA loan and must live in the house for a year before I can move. The payments would be $1976 because I am exempt from taxes. My income is $7600 a month and I have $600 in debt. So my DTI is currently around 35%. I want to spend the next few years, estimating 4, allowing my home to appreciate and amortize down to 20% equity in the home. Then I'd like to buy the second house using the rest of my VA entitlement which would be 0% down for around 350k and move into it and rent the first one.

having the first home i would be living in, i would be trying to get approved for the next 350k house, but the mortgage on the first and on the second combined puts my DTI to 65%. I know once I move out I would rent the first and the bank would cosidider 75% of the rental income, which would only put my DTI at 53%.

I can't generate rent in the first home until I've moved out into the second home I'm trying to secure the loan with 65% DTI with, which makes me stuck. Any ideas?

I have veterans united tell me if I take the first mortgage with them, for the second mortgage they will consider the rental income before I have a Tennant in it as long as I have a signed lease from a non family member that starts their rent the day I would move into the second home.

Any other lender tricks anyone knows about or things to do to make my plan come true?

0 Votes

Quote from @David M.:

@Christopher Beasley

To answer your question, that $2500/mo should be saved a few months to have some reserves --- I don't think you've mentioned anything... What I don't necessarily understand is with $2500/mo free cash (if I understand you correctly), in less than a year you have sufficient cash for a 20% down on a $200k property... If you want to continue scaling, you would see to have enough free income to do that... I'm actually not sure if that is $2500k/mo right now or after three properties for your dti calcs...

Just make sure your VA loan is cheaper, overall, than saying getting a conventional loan. Or for that matter, again is it useful to use the VA? You might want to start with conventional and finish with VA loans...

I would be making $1500 on 2 properties whos PITI is also 1500 a month. I would currently be living in the third property looking to move out and rent it, so the rent wouldn't count for 12 months anyways.

$3000 * .75 = 2250 toward income from rent, while I would be $3000 added to my debt.

My current debts are $264 credit cards
$342 car
My mortgage at the time would be $1650

$1650 + 3000 + 264 + 342 = 5256 debt
7635 (current income) + $2250 = 9885

which would put me at 53% DTI. So I'm asking, should I be putting my disposable income into the homes to refi them to free up cash flow so I can have a DTI to continue scaling? How much would I need to put into each house? Also, what would get me into a 4th house so I can start to rent the 3rd? Could I do a FHA loan and save up $7500 closing and $7500 downpayment?

I filed bankrupstcy 2 years ago, so VA loans are the only way I can get a mortgage right now. Also, I currently don't have funds saved besides $10k which I was going to use to buy the first house and then start using my residual income from there to put it where it would make the most money... which I'm curious where you would put it?

One thing I could do is buy $150k houses, save $30k refi to conventional. I have found 2 houses in a 50 mile radius of my current location that would refi to bring the 1st house examples PITI to 850 and zillow estimates would rent it for $1330, or the second home example would PITI for $687 and zillow rent estimator says 1095. These would potentially cash flow before maintenance or anything to $480 and $408 respectfully. I would manage my own property. But I can't determine if this cash flow for what I have to do to get the house makes it a good or bad investment.

I also have buy a duplex in mind but theres only 3-4 my real estate agent can find in 75 mile radius and there for 300k (which I could afford) , one has a tennant who only pays $950 in rent a month. and the others I have no idea how much each side would rent for to determine if they would be a good investment or not.

0 Votes

Oklahoma City, Oklahoma

Post error

0 Votes

Oklahoma City, Oklahoma

Quote from @David M.:

@Christopher Beasley

Oh I see what you are asking now... At first blush, not much. As you've described, you are fully leveraged.

I assume the rent equals at least your PITI, and not just the mortgage...

Do you have an cash to put down? If you started with buying at 5% down to start, then switched over to your entitlement...

Don't forget that rents are increasing right now. So, at least for the near future you should able to raise rents faster than your expenses.

To continue scaling, you might consider using non-conforming/non-residential lending such as a DSCR loan. If your income is a factor. However, you still need to put a significant amount down.. Probably your DTI will be an issue as rentals are calculated on 75% of the rent (not the profit, but the rent) when lenders qualify you.

Lets face it, this is investing. You need to have resources to invest as its not a job... I think your ability to get "free" VA loans is a huge resource.

Yes, the rent would pay almost exactly the PITI but no more.

you asked if my income is a factor, I have 7500 income with 500 debt total, minus rent. I have right around 2500 a month to put towards a loan to pay it off faster, save to purchase a conventional, or what ever would bring me the most profit.

right now I'm qualified for $450k loan, so if I just take a 200k loan, rent it for $1000, 75% of that is 750 so only a $250 hit to my DTI per house, take another 200k rent it and end up in the 3rd house until I move out and rent it, plus what ever addtl benefit I get from the 2500 a month putting it in the best place possible (which I'm asking what you'd do with it)

0 Votes

Oklahoma City, Oklahoma

I put 0 down and pay closing cost. I have 600k in entitlements. I buy 1 property for 0 down, just closing costs. Then after a year, I rent the first house, since it had 0%down, the mortgage will be more than a conventional loan... but the rent will = the mortgage. Then I can do a 2nd entitlement with again 0% down because I'm 100% disabled. Then I can do it once more which puts me at 3 houses over 3 years with 0 invested. The rent = the mortgage though, so no cash flow, but the appreciation on the houses is there and the principle is being paid down. That should make the investment worth it right?

with this ability to for sure buy 3 VA houses in 3 years with 0 down and $2500 disposable income along the way what could I do to build an actual portfolio beyond the 3 houses I would only make money by waiting for them to appreciate and the principle to go down. Could I put money into savings and either refi each loan to conventional which would lower the mortgage and give me $350 more a month cash flow each house at the expense of saving 30k per house's 20%. Or I could save that 30k and buy conventional 150k houses along the way the next 3 years. Or put it into mutual funds and diversify. Not sure

0 Votes

Oklahoma City, Oklahoma

Quote from @Wayne Marques:

Quote from @Christopher Beasley:

Quote from @Wayne Marques:

@Christopher Beasley

Utilizing VA backed loans are a great strategy to build your portfolio, I have used it also. The only thing I would suggest is working with a lender that works with other loan types in addition to the VA. There may be times where other loan types might make more sense. The duplex we bought last year was with an FHA loan because the numbers were slightly more favorable, but we weren't looking for $0 down at the time. We wanted to put some money down. This leaves us with the option to keep that house in that loan, as rates have increased, and we have the option to use the VA loan with our next one. Best of luck!

How did you use your VA loan to build a portfolio? My loan officer today said I could buy a 200k house, live in it one year, reclaim the remainder of my benefits and buy another $200k house, pay only closing, then even have enough remaining entitlement for a 3rd house at 0% down.

the only problem is when you put 0$ down, the rent you make and the mortgage your paying are the same thing and there's no cash flow at all.

I meant it adds to your options to acquire properties. I didn't mean going from a VA to another VA loan exclusively to build your portfolio. We didn't get a VA loan because it didn't cash flow as well, still would have been good in my case, just less than the FHA. But even if you can acquire your property with a VA loan and then get another type of loan you are still moving forward. I'm no expert, that's just what worked for us.

Well, in the 3 years I can aquire 3 200k properties $0 down, that won't csh flow, but still will appreciate and have the principle paid down. In the meantime I could use my cash income to save $30000 for another property. I just don't see the difference in buying a 150k property with 20% down investing $30k to just recieve $300 a month cash flow and take a long time to ROI that 30k. Or am I looking at it all wrong?

0 Votes

Oklahoma City, Oklahoma