Buy a House, Build Wealth, No Money Out of Pocket!
The VA-hack is an answer to young military members wanting to let their money work for them!
The VA-loan is a well-known benefit for veteran homebuyers. On its own, the VA-loan is a good program but if used correctly it can change your life!
Today we are going to talk about the VA-Hack. This strategy can take you from tenant to Real Estate Investor with ZERO dollars in your bank account! I know half of you just tuned out “get rich with no money down, this is a scam!”
This isn’t a get rich quick scheme, but it is a strategy to build wealth in Real Estate Investing with very low expenses!
What is a House-Hack
House-Hacking is the act of purchasing a duplex, triplex, or four-plex as your primary residence. This allows you to live in one unit and rent the other units out.
This is an ingenious method to purchase your first home because you will reap the benefits of home-ownership while your tenants pay the mortgage. You will enjoy smaller living expenses than you were paying for rent in that old apartment you were staying in. In some instances, you might even get paid to live in this home!
When you vacate the property and all units are rented you will receive monthly cash-flow until you sell the property. Of course, that is provided you ran the numbers correctly before purchase.
Reduced living expenses, home-ownership, and passive income when you move out! The only downside to this plan is that with a conventional mortgage it does still require 20% down in order to purchase the property. This is where the VA-hack comes into play!
An Affordable Way to House-hack (the VA-hack)
The VA-hack is the exact same process as the house-hack but without a 20% down payment.
A Veterans Affairs (VA) home loan can only be used for primary residences, but only requires ZERO% down payment! Any property with four units or less can be classified as a primary residence.
So, the VA-hack is when you purchase a duplex, triplex, or four-plex with only 0% of the purchase price out of pocket! You can even negotiate that the seller pays the closing costs and fees to mitigate your expenses.
To put this in perspective, a $200,000 duplex would cost you nothing (except for inspection and/or closing costs)! That is less than a car, and you can earn that money back in the first year with how much you’re saving on rent.
>>>This is only one of the many benefits of military real estate investing
Example of The Numbers
For this example, we will use real numbers from this duplex I own. I adjusted the numbers in order to show what it would look like if I had known how to use VA-hack at the time of purchase!
Inspection Costs: $800
Down payment: $ZERO
Monthly numbers while living in it
Rent income: $515
The total cost of living (plus repairs): $210.00
Housing allowance was: $850.00
I pocketed $640.00 every month!
Current monthly numbers (After moving out)
Rent income: $1030
Property Manager: $74.50
Money left for repairs/me: $350.50
I keep $200 a month to budget for Repairs/Cap Ex estimations.
This property makes me $150.50 every month now that I have moved out!
Using these numbers, you can see that I was able to recoup the cash I purchased this duplex within the first two months of collecting my left-over housing allowance!
Let that resonate with you real quick!
I moved out of my apartment and bought a duplex for less than $1,000. I got all of that money back in less than 3 months and I have been getting paid a little over $1,800 a year for keeping the duplex!
I’m sure you can appreciate how happy this eye-opening experience made me, and why I want to spread the word!
The Big Four!
These are the four ways that Real Estate helps build your wealth, find more about them here!
The amount of money in your pocket each month after all expenses have been paid is called cash-flow. I use this money to invest in my next real estate ventures and grow our portfolio exponentially.
Depreciation is a tax write-off used to cover costs associated with aging buildings and structures. This write-off and many others are great benefits of real estate investing. Every year I get better at tax-planning in order to increase our return and minimize the money paid in taxes.
Amortization is debt payoff. The way mortgages are paid off is set up to pay more interest at the beginning and less interest towards the end of the loan. None of that matters though because your tenants are paying your mortgage.
Every month we build around $1000 in equity between our properties, and none of that equity is paid for by us!
I think of appreciation as a bonus in order to avoid planning for it in my purchases. There is never a guarantee that your real estate will appreciate in value. There are a lot of reasons for market fluctuations but we can make educated guesses.
I never buy property hoping for appreciation. I buy for cash-flow in order to protect me against a market crash, but appreciation is a welcome bonus!
The Cost of Taking Action
The cost of taking action and buying my first real estate deal is that I am always looking for better deals now! Taking action is the single best thing you can do for yourself in order to tackle any pursuit in life.
Let us connect you with a solid VA-lender and realtor!
I wish that I had taken action sooner to learn about investing, Real Estate, and the VA-hack!
Don’t be afraid to start researching and investing, I promise, you will be pleasantly surprised!
You can use the VA-hack every time you move to a new duty station if you’re smart about it. You would have to refinance from a VA loan to conventional before you move, but that will be easy!
The important thing is to understand that you’re buying an investment, and it might not be the most beautiful home you ever own. It will be a force multiplier for your financial well being though!
I hope that you’ll pick up a book or two in order to learn about how to hack your living situation! Swing by our website and take a look at some of our other posts about investing and personal development.
It is time we stop worrying about how little we get paid, in order to start learning how to turn it into wealth for the ages!