Using your VA loan as an investment

We sometimes get asked by our loan candidates about if they can use their VA loan as an investment. While the answer to this question depends on what you consider an investment, I can share how I used my VA loan as an investment.

Multi-Family Homes

The VA loan can be used to purchase up to a 4-unit house so long as it is owner occupied. These homes are also known as multi-family dwellings, and can be referred to as 2, 3, or 4 family houses. These homes are typically separated units with each functioning as a separate apartment.

In 2008 I used my VA loan to purchase a 3-family home in Massachusetts with 2 out of the 3 units rented out at $1,250 per unit for a total of $2,500 per month that I was collecting in rent. I moved into the 3rd unit and my monthly principle & interest, taxes, and insurance payment to the bank was approximately $2,700.

pcs-family-home-2

Through this arrangement I was able to own a home and only pay $200 ($2,700-$2,500) a month towards my monthly payment. This gave me the opportunity to have my tenants pay down my mortgage while I lived almost free in my home. Fast forward to 2012 and I now live in another home but still own the 3-family and have it fully rented out and clear over $1000 a month in rental income after accounting for my fixed expenses.

Below are some basics to consider. It is important to note, though, that being a landlord is an entirely different topic and not for everyone. Also, like most investments and being a homeowner, there is risk, so it is important to do your homework.

  1. Identify the area you are interested in buying: If you are interested in generating rental income it is important to look at areas that have low home values with higher rental amounts. The lower the cost of the home the lower your monthly payment amount. The higher the market rents are in the market then the more that your tenants will contribute to your payment and more of your money that you’ll keep.
  2. Start looking at homes: Any realtor can set you up with Multiple Listing Services (MLS) updates based on your criteria that you tell them. Also, a good realtor knows markets that would best suit your criteria and can guide you in were to start looking. You tell them the area that you are interested in looking at, your price range, and types of homes (single family, 2, 3 or 4 family units). Then, you will start getting emails with homes that meet your criteria that if you want can start scheduling a viewing.
  3. Know your costs: The amount that you will be paying monthly is your principle, interest, taxes, and insurance is what you should focus on. You can use VA Loan Captain’s Payment Calculator and input different scenarios to see what your payment would be. There are also other costs such as water/sewer that I typically allocated $100 a month for. Also, there are costs for maintaining any home single or multi-family which you will need to consider and depends on the age and condition of the property.
  4. Know your rents or potential rents: You can ask your realtor what the average rents are in the market that you are looking at. For example if average rents in the market for 1-bedroom apartments are $1000, and the units in the multi-family home that you are looking is average to what is available market, then you can use that to determine what you could charge if the units are vacant; or, what you could charge if there are tenants already in but paying a lower amount.
  5. Other considerations: If you go this path you will be a landlord which is something that is a small part-time job and not for everyone. Having some basic knowledge on appropriately screening applicants and knowing the state law will go a long way. Basic items for screening applicants include doing a credit check and collecting and calling references.

Overall, using a VA loan to purchase a multi-family was a great experience that has now set me up with a solid cash flow positive investment. While this was beneficial, it required a lot of work and learning along the way.

TOP ARTICLES
These are the military traditions for deployed troops celebrating Thanksgiving

While you're deployed, weekends aren't really a thing — neither are most holidays. Thanksgiving, however, is a moment when the military slows down.

Forget multitasking, this Navy squadron has only one mission — rescue people

The Navy has an entire squadron for search and rescue, and it is the only squadron in the Navy that has an advance life-support helicopter platform.

How the Coast Guard intercepts half a million pounds of cocaine

For the last couple decades, the Coast Guard has pushed out further, taking more aggressive stabs at the flow of drugs that make their way into the U.S.

More remains of Special Forces soldier found in Niger

The Department of Defense announced that military investigators found additional remains that they have positively ID'd as Sgt. La David T. Johnson.

'Butcher of of Bosnia' sentenced to life in prison for genocide

"The Butcher of Bosnia" was handed a life sentence on November 22nd, 2017, for war crimes and the slaughter of 8,000 men and young children.

New engravings on the USMC War Memorial honor Iraq and Afghanistan Marines

On Nov. 22, the U.S. Marine Corps War Memorial was updated to include Afghanistan and Iraq in the list of campaigns that runs along the memorial's base.

ISIS may focus on a virtual caliphate after losing real-world war

As the Islamic State loses the in real life war they've waged against the world, they've moved their game online- waging war in the virtual world.

Everything you need to know about Zimbabwe's ousted dictator

The dictator of Zimbabwe announced his resignation on Nov. 21, 2017 after the county's army took of the capital and family, forcing the resignation.

Watch this Marine get pinned by his 3-year-old son

Watch this adorable little boy steal into the hearts of all the Marines and civilians present as he promotes his dad and pins on his promoted rank.

Watch a North Korean defector dodging bullets to cross the DMZ

A North Korean attempting to defect to the South, who was found to be full of parasites, was shot by his fellow soldiers. We Are the Mighty has the video.