Posted by John Burley on September 27, 2001 at 15:01:13:
The VA program can be very good or very bad. In some areas the bids run very high. In other areas they are at, or a little below market value.
Generally speaking, they are long term investments, not quick cash deals.
One great thing about the VA loans is that you can resell the property on a land contract without violating a due on sale clause. I have bought and sold hundreds of properties with VA loans, creating a monthly cash flow in the mid five figure range.
Just make sure you don’t pay too much for the loan.
The previous post suggesting to take out the commission works well (as the VA is only concerned about the net to the VA).
Also, the comission is 6%.
In some areas they are $500 to 1% down to the investor/buyer. Many areas will also do a low doc loan with 10% down.
Bottomline, they are great loans (especially with the ability to resell on a wrap), however they are often overpriced.
I found an agent with REMAX that has 21 investment properties herself and really likes to go after VA properties. She seems to have a keen insight into how much a property should sell for and how much rent it will command. Since the VA process is a closed bid this is very important.
She has also told me that the VA has a non owner occupied 95% LTV program at 7% interest. The loan is assumable upon future sale. Not Bad. Purchase of one of these properties with still depend on a cash flow analysis. My question is, what are your opinions of VA sponcered programs? Are there any pitfalls? Things I should look out for?
Posted by Mark (SDCA) on September 25, 2001 at 13:40:08:
Here is my .02. VA properties can make decent buys for LONG TERM rentals due to the financing which is exceptional for NOO. But do not expect to go in and buy VA’s at 70 or 80% of FMV. It isn’t going to happen. I have seen VA’s bid up well over FMV. So make sure you don’t over pay. Also, you are going to want to make sure you get an inspection somehow. A realtor told me that I could inspect AFTER winning the bid and if I didnt like what I saw, she could get me out with my earnest money intact. But I never tested that promise.
Posted by Ron (MD) on September 25, 2001 at 08:31:20:
Steve,
In Maryland, VA homes are rarely a bargain. They almost always “rehab” them before putting them up for sale. I put quotes around “rehab” because they do a very fast, cheap job…new carpet and spray paint. They usually don’t replace kitchen cabinets, etc. Here, they don’t even prep the walls prior to painting (e.g, patching nail holes, etc.)
I’ve briefly considered a few of their houses, but decided I would have to completely redo their “rehab”…repaint the place (after proper prep), get rid of the crappy carpet, etc.
They do offer attractive financing to investors, although I’m not sure exactly what the deal is. I think on some properties they offer 100% financing to investors.
One word of caution. They pay agents a commission that is well above market. (I think it’s either 6 or 8% to the selling agent, compared to the normal 3 or 3.5%.) As a result, agents have a strong preference for unloading these on uninformed buyers.
Posted by Dave T on September 25, 2001 at 06:16:24:
Don’t assume that the assumption feature will make your property more attractive to a potential buyer. The VA assumption is will require the buyer to qualify for the financing.
VA opportunities should be analyzed on a state by state basis, as the conditions of sale vary. What I have found is that, in my state VA opportunities are very realtor friendly ie. much better deal for licensed investors as you can get a higher net to VA by eliminating the commission thus increasing your chances of being high bidder. I buy them myself in this manner on occasion but I can do much better buying SUB2 from homeowners. That’s a bit too creative for the average realtor however.
Posted by willie T on September 25, 2001 at 08:40:18:
We have found that VA repos that are purchased with VA financing have insufficient margin for the experienced investor. They do make financing somewhat easy, but we believe it is at a corresponding cost to the investor. Relators do well either way. Hud repos on the other hand can be bid/purchased sometimes by the investor at sufficient amounts below their value to make them worthwile for the bureaucracy you go through to get them.