We love our Veterans. They put their lives on the line daily for us to be able to freely move about the country. As they serve and protect, options like the VA no-money down loan open-up for them to buy and sell real estate. Which makes every seasoned investor jealous. Some Veterans have made it their second career investing in real estate. How do they do it? Well, lets take a look.
VA No Money Down Loan Financing Basics.
First, understanding the process will be beneficial. Some veterans do not even know they have the option to purchase real estate no money down. Now when I say no money down, that means, no upfront money is needed to receive the loan. All veterans need to bring to the table is enough for earnest deposits, closings costs, and fees. What is great, sometimes sellers will provide the closing costs for you.
In addition, these loans do not have mortgage insurance added to the monthly payments, saving you possibly thousands each year. Learn how to ask for the seller to provide closing costs or get yourself a great real estate agent to help you get the closing costs covered for you. To recap, the major difference between the common citizen and the Veterans, is the fact Veterans do not need the standard 3.5% down payment of the purchase price. This can be huge for many and open the door to home ownership.
Rules of VA Loans
With great benefits, comes great responsibility. Because Veterans are offered a great incentive to purchase real estate, there are rules that must be followed to make it fair for the other folks. First important rule is this, the property purchased needs to be your primary residence. This means you can not use these loans for purchasing vacation or seasonal homes. You may purchase property anywhere in the USA, it just needs to be your primary residence to qualify. A year will have to pass before selling. Below are a few other qualifications the property must follow. Basically, from what I see, the property of your interest needs to be habitable.
- Mechanical systems must be working.
- Heating must be adequate
- Roofing should be free from leaks
- Crawl spaces and basements must be dry
- Property must be termite free
- No major mold and fungus growth
- Lead-based paint must be remediated
Even if there are some things that come up, if you have a repair plan in place, the lender might approve you for the loan. Plus, repair costs can be rolled into your loan! Great benefits for Veterans. If you have a plan and a vision in place, you can likely get the property you want.
Making Money with VA Loans
Now that we have went over the basics and rules of obtaining a VA loan, lets see how we can make some money with this. The first step is to find a property that you think will be great for you to live in and decide if a repair plan is needed. Is it a property you can move right into? Or is it a property that needs work? Whether you are repairing or moving in right away, always try to purchase a property under value. For example, if a property is estimated to be worth $175k, try offering $168k. You never know, a seller could be wanting to sell as soon as possible. By purchasing a property under value in the beginning you set yourself up for success in the future. As an important real estate investing motto is this: You make money when you buy, not when you sell.
Once a property is under contract, your lender will provide the next financial steps. This is where your earnest money will be collected along with fees, and closing costs. A lender will review your repair plan if needed. Inspections, appraisals, and walkthroughs will then take place. After all is good, the property is yours. And to make money, you buy low sell high. Renovate to help make profits increase, so that when a year is up, you are ready to sell and collect your earnings.
Putting it all Together
The real estate market on average goes up, therefore, with renovations done, and appreciation occurred, in one year, you can see a good profit. After that, you can sell the property and find a new one, or just hold on to the property. Holding is great as you can still get “cash” by refinancing. It works like this, you buy a property for $175, put $30k in updates, accounting for appreciation as well, the property is now worth a year later, $228k. By refinancing, your loan value is now $228k, minus $175k, minus, $30k for renovations, which leaves you $23k in cash.
You can use that money for a down payment on a rental property or even use it for more upgrades to the original property. The monthly payments will be larger as you are now financing at $228k, so prepare for that. That is why a lot of times, I hear most people using that money for a down payment on a rental property. This way they receive cash flow to help with the larger monthly payments.
I appreciate all Veterans and the work you do, maybe you will take something from this article. I see and hear many stories of Veterans not being aware of the benefits. No money down financing can be obtained. Contact your lender and real estate agent to get started. Making money with real estate is a simple process, its finding that right deal that can make the difference. A veteran using no money down real estate investing strategies can make great income. Risky though, as it is still technically investing. And you should not invest money you are not able to lose.
Start with a cushion by purchasing a property under value. Have a repair plan in place, and estimate all costs involved, so when it comes time to sell, you are in the green. That is all for today, thank you again. And be sure to be on the lookout for next article! Stay tuned.