Best Ways to Use a VA Loan for Investment Properties

ne of the best and easiest ways to acquire residential investment properties is through the use of a VA loan so in this video we're really going to drill down into two maybe even three different concepts to exploit that whole VA program so that you can maximize your ability to acquire rental investment properties so let's kick off this Rodeo right now hi folks Kevin Fagan Here I Am the mortgage Patriot on your side here in Central Texas in a beautifully Hill Country of San Antonio serving proud Texans as well as veterans in Texas and all across the country so two things before we start before I get into the subject matter if you could hit the like And subscribe button please that really helps you and helps me get my content out to you so that my goal is to have a really good set of actionable videos in a library that you can access it'll help you either buy or sell or invest in real estate so just that simple and secondly you can call me or text me if you have a question on VA loans in this case or FHA Loans or any kind of financing matter let me answer those questions for you so please call me at 210-317-6514 so I do receive calls from people all over the country and I love talking to y'all so let's get into the subject matter of the VA loans and how to use them to establish a portfolio of rental homes throughout your lifetime as I walk you through these strategies there isn't a companion video that I may Aid and it's entitled VA loans explained 2023. that's going to go over more of the primary residence and more fundamental aspects of the benefits of a VA loan great video to brush up on but here we're focusing more on the investment aspect of using your VA as an ongoing strategy so let's get into it what does the VA loan allow you to acquire in terms of how many units so that's quite easy you can acquire a single unit a duplex a Triplex or a four unit property a four Plex so it allows you to have multi-family units up to one to four family while still enjoying that zero down 100 loan great great benefit of the VA let's talk about two strategies using the VA loan that when combined with purchasing multi-unit properties can really catapult you or your family's wealth in a very short amount of time so let's talk about renovation loans the VA renovation loan as opposed to a traditional VA loan if you're trying to purchase a property the house is just beat up outdated it has some issues that need to be fixed you would not normally be able to use a VA loan for that property because a VA assigned appraiser would go out to the property and say I'm sorry it's not VA eligible because the roof is leaking because the decking is faulty and presents a risk factor now they're not going to say that you can't use a VA loan because you have outdated kitchen for example or you don't have disability access to the bathroom those aren't the issues it's really more like safety issues or Foundation or roof issues those kinds of things but a VA renovation loan you would buy the house for 275 for example and you would get a VA approved contractor to go out and do a scope of work and let's say that scope of work is fifty thousand dollars to fix the roof to fix the the decking and to do some updating new lighting maybe electrical here or there add a new kitchen and seeing and so forth and that all totals fifty thousand dollars great so now you can purchase the property you do not have to come out of pocket for that fifty thousand dollars the beautiful thing of course about the VA loan it's 100 loan so that's funding both the 275 000 and the fifty thousand dollars so it's a 325 000 Loan in this example and 275 would go to pay Down The House of course to control the home and then fifty thousand dollars will be in a separate escrow account and so contractors would then take draws off of that escrow account and that's how that basically works most agents and most veterans believe it or not have not heard of the renovation alone and there's a reason probably 99 out of every 100 lenders that are available to extend via traditional loans don't have access to the VA renovation loan so just because they can give you a traditional VA loan it doesn't mean they have access to the VA renovation loan it's very rare I as a broker have access to about 135 VA lenders and only about four of them allow for VA renovation loans so it's very unique but the Savvy veterans that do understand that this is available exploit this and and you should too because again you can now buy a home that you wouldn't normally be able to buy because it wouldn't be eligible due to the repair work necessary you can use the VA renovation loan so let's talk about a little bit of the criteria once the renovation loan is in place you do need to finish the work within 120 days that's one of the criteria completion of work within 120 days secondly what can you use it for you cannot use it for extra a square footage in other words you cannot add onto your footprint of your home so to speak if the home is 2 000 square feet you can't add 200 more feet with more foundation and more Roofing and to add it basically another bedroom you can't do it and you cannot add anything exterior to the home you can't add a pool you can't add a carport a covered carport a garage for example everything needs to be inside the original footprint of the home now you can do a lighting Electrical Plumbing updated of all the inside fixtures and so forth but again no adding of square footage and nothing on the outside I believe the term the VA uses is that that money needs to show that it's going to make the property more livable and more valuable let's talk about that last investment strategy using a VA loan and then we're going to give an example combining all these features to show you what really Savvy VA purchasers slash investors do to create wealth for their families so the VA loan allows you to purchase a home one to four units as we mentioned and then after just 12 months to then purchase another new home you don't have to sell your existing home you can rent out your existing home the feature is the reusable nature of your VA eligibility once again living in your primary home be it a one to four unit property after 12 months you can then rent out your existing home and purchase another home using your VA eligibility now there's some small restrictions on that you can't just buy seven hundred thousand dollar homes every single time there's going to be some restriction in terms of price points but I've seen it happen many many times where veterans who are only 10 years out of the service whatever Branch they were in they've already acquired four or five homes how do they do that well once again every two or three years they are re-upping into a new home and they're just renting out their prior property so incredible strategy and all the while not paying any down payments at all because these are 100 loans be they just purchase or purchase and renovation as we've spoken of earlier so let's combine all of these three techniques using multi-family purchasing using the VA renovation loan and then using your VA eligibility again and again let's use one big example of a VA couple that buys a home in year one buys a home at the end of year three or the start of year four buys a third home at the start of year seven and buys a new home at the start of year 10 and we're going to assume a few things we're going to assume just four percent appreciation which is not much houses of course have appreciated annually much faster than that over the last 10 years but let's say annual appreciation of four percent let's say a purchase price in each example of two hundred thousand dollars with a forty thousand dollar renovation scope of work and by after they apply the Forty thousand dollars they've added another ten thousand dollars of just Equity just by renovating the property so in other words they're picking up a 200 000 property they're putting forty thousand dollars in renovation and at the end of that quick renovation their property is now worth a quarter of a million two hundred fifty thousand dollars let's look what that looks like over a ten year period I'm gonna walk through this example relatively quickly but again I'm going to combine uh the three aspects or the three benefits that we've spoken of already in this video which is buying multi-unit properties with the VA loan uh using your event using the VA renovation loan to add Equity basically free Equity because you're improving a property and then lastly re-upping or reusing your VA eligibility and renting out your former home so let's look at this and we made some assumptions there's all kinds of assumptions that could be made so uh don't beat me up too bad on this but here I'm assuming once again VA couples buys a home every three years so you can see in year one they're buying a single unit home at the beginning of year four they're going to buy a duplex at the beginning of year seven they're gonna buy a Triplex and at the end of 10 years they're going to be buying a four Plex so they've got one of each of the one through four units and let's see what that looks like after four years so we're assuming again the purchase price on each is two hundred thousand plus forty thousand dollars worth of renovation creating a 250 000 property in other words you're gaining ten thousand dollars Equity right away just from doing that work yourself rather than buying a 250 000 property uh monthly rental we're assuming it's gonna be a base rent rent of uh two thousand dollars per uh property and so we're also assuming that the property appreciation is four percent a year and that the rental appreciation is three percent a year okay so let's go on down the road 10 years from now let's see what that looks like so 10 years from now the VA couple owns four properties starting you know starting in year 10 as we mentioned uh they own a total of nine rental producing units or doors like some people like to talk to my own 30 doors I own 20 Doors well you so the VA couple would own nine ten doors total they're living in one and they're renting out nine of them okay now from that and from those assumptions prior we have net cash flow of over uh a thousand five hundred dollars uh across those nine units not bad can't probably retire off of that yet but when you figure you haven't really put anything down on any of these properties that ain't bad to start out and they have probably around three hundred thousand dollars worth of equity across all those four properties now let's jump to year 20. 10 more years down the road net your net income has improved to seven hundred thousand dollars now we're getting somewhere uh approaching that one million dollar magical Mark right and the net cash flow is probably around three thousand five hundred dollars per month that's net cash flow above your mortgage expenses so now it's getting close to something you can retire off of and let's look at that final uh 10-year tally uh the first of the mortgages come off the books your net income has really exploded uh to over to 2.5 million dollars in your net cash flow your net cash flow is over eleven thousand dollars per month that is definitely something you probably would be able to retire on in 30 years so this is all uh this is not conjecture by any means I see this once again all the time with a lot of va people who are are retiring in their mid-30s mid 40s and they're maybe they've taken a second job maybe they haven't but they're but every two or three years they're re-upping into a new new home renting out their prior uh property and going on down the line and then letting that hundred percent loan to value uh initial investment really start to pay off for them over time and as those rents increase and as your mortgage balance decreases your cash flow goes up and your and your net Equity goes up wildly so very very good strategy to use a VA loan uh to build be the stepping stone to build an Investment Portfolio my name is Kevin Fagan please call me at 210-317-6514 I am the mortgage on your side here in Texas ready to answer all your VA questions and any other loan related questions and I'll see you on the other side thank you foreign