Buying another property and renting out the first one

codom2000 · Joined: 13 Mar 2006 Posts: 10

Hello I have an question, I just purchased property in colorado springs, colorado Jan 06 and I'm about to moved due to military reasons back to Texas. I want to rent out this townhome 180K and purchase this home in roundrock Texas, around 160k. I know when I first get there I maybe renting an apartment but I really don't want to I perfer to buy an home, because rent is basicly the same if not sometimes higher. If anybody can help me out and shed some light on my situation I really appreciate it. I will be moving to Texas end of this summer.

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

You can do it. If you rent out the home you're moving from you generally will only be able to use 75% of the rent.

Other than that, I guess we'd need to know some more specifics. Like, did you use a VA Loan on the first property? If so you may not have enough entitlement left to use a VA on the 2nd.

chow · Posted: Sun May 14, 2006 9:22 pm Post subject:

ahhhhh, doesn't that have to be owner occupied for 12 months?

:shock: :?

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

Sure sure, if you're going by the rules!!

Maybe he bought it as an investment property to begin with, didn't think of that, didcha!!

codom2000 · Joined: 13 Mar 2006 Posts: 10

Yea it was just for investment period. I wasn't planning on staying in colorado springs, colorado. I did use my VA loan for the property although I'm thinking now I should of went with FHA Loan but I not an expert in this matter just starting out invester. I will be looking to buy property around aug to sep time frame. My property here in colorado will be rented out starting AUG. Are there any special things that I need to do once I have found the property that I wanna purchase in regards to cementing the 2nd loan in texas. I apperciate this info alot from all who replied and future repliers. My Mother will be moving with me she never had and house but her credit is really damage, I was thinking of letting her co sign but her credit stop me.

Also So since I use my VA Loan whats other loans should I seek, for an young invester?

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

If you purchased the home with the intent of it being an investment, and you used a VA loan, you're in an interesting situation.

What you should do is refinance the home that you are in as an investment property (conventional loan) prior to or at the same time as when you move. When you move, if you intend to live in the property for 12+ months, then use a VA loan. If you qualify for the VA loan, there isn't really any reason to go with an FHA loan. They are both owner occupied loans. In other words, you must live in the property.

If someone moves into your house and you keep that loan, you may not qualify for a VA loan when you move.

If you do a VA loan where you move, and you add your mother, you will (or she will) b e responsible for 50% of the entitlement. If she was not in the military, this can be an interesting complication. Probably best to either A) go conventional (if possible) B) go FHA and work on her credit, or C) do a VA in your name only.

chow · Posted: Wed May 17, 2006 2:17 am Post subject:

Any loan you take out as Owner Occupied, be it Conventional, FHA or VA- restricts you from making it a NOO occupied home for 12 months. If you went into a program where you agreed to occupy the property for a longer period, you face the dreaded demand clause.

Look at your closing documents. That thick package you walked out of the closing agents office with. 99.999% of all loans require you to have a 12 month owner occupied status.

If you did not know you would be transferred, there are exceptions, but if you used your entitlement to buy a home with the intention of making it N/O/O in less than what the VA/FHA loan required in the closing documents-which were recorded...Son, Daughter-

Momma chow is here to tell you, you got a problem.

codom2000 · Joined: 13 Mar 2006 Posts: 10

thanks so much so my best bet right now is too refinance. My plans was that I was going to Iraq but I didn't. So once I refinance it opens up my VA loan again? Thats great now the type of loan to refinance too is an coventional loan, because it doens't restrict you to stay in the house for 12 months, then when I get to texas " I know for sure I'll be there for 12 months", and use the VA loan am I correct?

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

Yes.

Keep in mind that investment properties are high risk and therefore have higher cost and generally require some kind of equity.

chow · Posted: Wed May 17, 2006 3:38 am Post subject:

If you don't intend to occupy the property, then apply for a non owner loan/ investment property loan when you refinance. That way, at the closing table you are not signing a disclosure that says you intend to live in it. www.va.gov has information on line. You can keep the mortgage if you end up not selling the property, and part of your family is a "trailing" situation-meaning you all don't relocate at once, but that may lower your benefit status when you go to buy a new home. VA insures the top 25% of the new home to be financed. If your entitlement is $36,000 then you can buy a home for 4X $36,000 or $144,000. If you are still carrying a balance from your old loan on you VA benefit, then you may have to go for a FHA/VA combo type loan. (Your Loan officer would have to go over all of this with you after looking at what is left over) VA loans can be assumable-maybe you just want to sell the house?

How does one manage rental property and make a profit when 25% of your rent is sliced right off just for upkeep, and you need to price your rent at least 150% above the mortgage payment, the taxes and insurance?

and you're going to be an out of town landlord?

Maybe my evil twin should have asked all of this? :wink:

Keep in mind you have to also jog over to the VA site and get your entitlement updated too.....(I just put that on your "Honey Do" list)

codom2000 · Joined: 13 Mar 2006 Posts: 10

Yes I will be an out of state landlord. Property is an brand new townhome with management fee's. Yes I do want to keep this townhome great area for investing. I will look into refinancing with the non owner loan.

when I refinance I need to change my entitilements then?

chow · Posted: Wed May 17, 2006 11:39 am Post subject:

correct.

codom2000 · Joined: 13 Mar 2006 Posts: 10

apprx how long does it take to refinance? I pretty sure there is lenders on here but whats the difference isn't all the rates the same when you are looking at a fixed rate? and I have an question I don't know was this lady just blowing smoke but I meet her as a friend only once and she was telling me that she can get me locked in rates at 4-4.9% (i don't remember exact number) but are there like extra benefits of being an loan officer where you can get rates that low?

chow · Posted: Mon May 22, 2006 1:50 pm Post subject:

I don't know what kind of weed they are smokin', but there isn't any fixed rate that low right now. :roll:

You don't want that smoke, or the mirrors that go with it. It only takes someone about 30 days at most to close on a loan.

m2c · Joined: 03 Aug 2005 Posts: 937

Of course there's a 4.9% "fixed" program out there. They just don't mention it's fixed for either 1, or in this case 6, months and that's is an option ARM.

A number of real sad folks around here didn't "discover" this until they noticed their loan balance was going up each month rather than down.

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