Make millions with a VA Home Loan? If you’re a veteran with a bit of an entrepreneurial bent it may be possible. This is how Brian, a veteran, did it by investing in real estate with his VA home loan. When you get a VA loan you’re also investing in real estate anyway, so how can you make money off of it? There’s a bit of a math exercise coming here, but we’ll keep it simple.
Buying Multifamily Rental Properties
You’re allowed to purchase multifamily rental properties with your VA home loan. Let’s say in most states your VA home loan entitlement is about $417,000. This changes each year and can vary depending on the state or the city you live in, so you need a good mortgage broker to help you through this process.
To start out, let’s assume you have $417,000 worth of rental properties. In Brian’s case, he bought a fourplex and a duplex. That’s a total of six units and the overall price fit within the entitlement amount. The amount of multifamily real estate you’ll be able to purchase obviously depends on property values where you live.
Making Money Based On The Increasing Value Of Your Properties
Here’s the math. If you purchase $417,000 of real estate on your VA home loan, you’re doing it with a zero dollar deposit because it’s zero down payment. The mortgage period is 30 years. The average percentage rate of the real estate market increase per year in the United States is 7%. If you take that value of $417,000 and grow it at 7% for 30 years, your maturity value after 30 years is $4.76 million (not bad for a $417,000 investment).
Make More Money With Rental Income
But it gets better because you can rent out units.
Let’s say you’re buying rental units at $46,000 per unit. For that cost, you can purchase nine units for $417,000. Assume you rent out each of those for $650 a month. In Brian’s case, he bought slightly more expensive units and had 6 rental units in total.
If you can get nine units, your gross rental income at $650 per month for each unit equates to $5,850 gross per month. Now, if you figure that you’re going to pay around $2,000 a year in property taxes and another $2,000 a year in property insurance, and you’re paying a 4% interest rate on the mortgage, your mortgage payment total for the nine units will come out to $2,324.
Subtract Money Due To Maintenance
Let’s not forget maintenance on the units, so subtract $300 per month for this because you’re going to need to replace things. And that’s all there is to it. For Brian’s six units, he’s spending less than $300 a month (by a long shot), but he bought into newer buildings. And when he purchased the fourplex, he put in a substantial amount of money renovating it. For him, it’s pretty low maintenance at this point in time.
Plus he uses property management services which are important for liability reasons and for getting good tenants. And for when you’re first starting out, Brian believes it’s really important. He wouldn’t suggest anybody purchase and rent out multifamily homes without having property management.
Pulling It All Together
Your net rental income from these nine units is $2,024 per month. That’s money in your pocket. We won’t talk about tax deductions from these rental units, but know that these will actually increase your net income substantially. Over 30 years, your total rental income, not counting tax benefits, will be $728,000. Add that income to the $4.76 million mentioned above and in 30 years you’ll make $5.49 million of income from your VA home loan.
Brian highly recommends jumping all over this like he did, especially if you’re a single person and willing to renovate properties, and you will also stand the chance of making millions of dollars off of your VA home loan.
Of course, not everyone wants to be a landlord and there are risks associated with real-estate prices declining at any given point in time, but if you’re so inclined this may be a great option worth considering.
Source: Finding Success.