House Hacking With A VA Loan: How To Get Paid To Live For Free
1. Use Your VA Loan To Buy A Multifamily Property
2. Move Into One Of The Units
3. Rent Out The Others
You can do it with Zero Money Down!
Let’s play the numbers game right now. We’ll exclude all utilities and other expenses for the sake of simplicity. Say you’re paying $1000/month in rent right now. If you read our earlier post about VA Loans you know you can use a VA Loan to purchase a duplex with zero money down. Let’s assume this duplex will have a mortgage payment of coincidentally $1000/month. You move into one side of the duplex and are able to rent out the other side for once again $1000/month. For all intents and purposes you are now living for free! If you take a minute to think about the net difference in your bank account at the end of the year it becomes apparent how much money this strategy can save you. In this example you would end up with an extra $12,000 spending money every year. AND that’s not even including all of the tax benefits afforded to property owners by the government. This is a very simplified example and doesn’t take into consideration many of the expenses of owning property but illustrates how the concept works.
Definitely beats torching $1000/month paying someone else’s mortgage with your BAH doesn’t it?
Weigh the pros and cons of living near tenants. How comfortable would you feel living right next door to them? If you’re a timid person or shy away from confrontation this could be an issue for you if you have any sort of problem with the tenants. A solution to this is to hire a property manager. They take a portion of the rent (usually about 10%) and handle everything including collecting rent, finding new tenants and organizing repairs (though you still have to pay for them). Its a personal decision as to whether spending this money is worth it to you.
A benefit is that you’re able to keep a better eye on your property since you’re living in it and most renters will keep their place a little nicer knowing the owner is right next door. Also, when screening potential tenants those that are likely to cause trouble or party all of the time will shy away from a property with a live-in owner.
Realize depending on the market in your area and the property you purchase you could go from having most of your mortgage covered, to all of it, to even making a bunch of money. Remember also that you only have to occupy the property for one year to satisfy the requirements for a VA loan so you’ll be able to move out in no time if you want.