All Forum Posts by: Kirk Olson

@Curio McGrew 

Congrats on your first purchase and with a VA loan! This is exactly how I started and that is still my best acquisition to date.

Just found this

http://portal.hud.gov/hudportal/documents/huddoc?id=26-7c12VALH.pdf looks like the guidelines used to deem if the property is safe and habitable.

@Michael Kennedynot necessarily the case, like I said I don't know all the exact ins and outs of that but I do know if the building needs obvious work the seller will likely have to pay for that. If it's something found in the inspection and not by the VA appraiser then I don't believe it will have any impact. For example the furnace and water heater in my home are well over 15 years old, to me that is a bigger issue than paint chipping on a crappy shed in the backyard that I'm not living in, but nothing was said about those.

@Michael KennedyI made no down payment on my first property. I only paid closing costs and rolled my VA funding fee in with the loan.

I don't know all the appraisal requirements, but on my second use of the VA loan which is my current primary residence the issue that held our closing up was chipped paint which is not allowed by the VA. This chipped paint was on a shed in the backyard not even on the house. As the appraiser put it, "it just says chipped paint it doesn't say where or on what". Any and all issues like this that are found must be fixed prior to occupancy according to the VA. We were able to delay the fixing of this because we purchased in winter and a very heavy snow winter at that and were not going to be able to paint it for over 30 days so we were allowed to put the sellers money in an escrow account and have a contract with a painter to remedy it as soon as possible.

On that note, don't think that you're going to be able to buy a multi family that needs work and rehab it, the VA won't allow that. If there are items to be fixed like my paint story you will not be allowed to do it yourself, the VA requires the seller to take care of all these issues, whether they do it themselves or hire a contractor.

@Michael Kennedymy first purchase was a Duplex.  @Chris Masonat no point during my purchase did that come up I suspect because I could afford the payment without the rental income. I believe this will be where a good lender comes in since they will be the one asking questions and reporting to the VA. If this comes up I would be honest and if you have no experience don't lie just tell them that you have not owned a rental property before but show them that you know what you are doing by walking them through your analysis.  Perhaps show them lease agreements you intend to use, rental applications, move in/out checklists; just be professional.  If they say no move to another lender.  If absolutely no one can pull it off find a local investor that is willing to let you do some light management for him: collecting rent, showing a unit, or correspondence with tenants or contractors and use that to satisfy the requirement.

@Michael Kennedy you do not have to get a VA loan from a military focused bank like USAA or Navy Federal. I have gotten 2 VA loans and neither were from a military focused organization just ask your local lenders if they do VA loans, many do.

For what it's worth I bank with USAA and they have would solely bank with them if not for needing an account at another institution.  Their biggest pain from my perspective is depositing cash since there are only a handful of cities that have an actual branch location.  

I'll be there!

I will elaborate on what @Steve Vaughan said with an example. I purchased a Duplex for $154,000 with a 2.75% interest rate. The taxes are ~4k a year so my overall PITI is $1147/mo and the total monthly rent is $1950. Now with rates hovering around 4.875% you would have to purchase the property around $120k to receive the same return. So if a buyer were looking for the same return their value of the property would be less than what it was when I bought it due to their cost of capital. The same holds true for owner occupant buyers. With a lower interest rate a family can afford a 230k house with a $1000/mo payment as interest rates rise that $1000/mo will pay for a cheaper house due to the extra interest.

There are ways to shield yourself from this a little.  The first being purchase value add properties.  If you intend to buy and hold you will have less money in the deal than a close to retail purchase and so your return will be higher, and if you intend to sell in the near term you won't have to worry about increasing interest rates eroding all your equity.

This is my first time through the real estate cycle as I've only been investing since 2012 but there are currently 3 exact same duplexes for sale near mine and I would not pay $154500 for them today.  I would still make money at that price but I can make more elsewhere. Hope this helped.

I'm in! Weekends work best for me any time of day.

Very creative and sounds good for you.  I'm curious though, how does your now $710 rent compare to other rentals of the same type that have those items already in the unit?