From Dream to Reality: How I Helped a Veteran Client buy a 4-Flat with Zero Dollars in Out-of-Pocket Expenses
“So no shit, there I was...“
That’s always been my favorite way to start a great story. Well strap in, because this is a good one! By now, it’s fairly well-known that you can purchase a multifamily property with a VA loan, provided you use it as your primary residence. I have helped dozens of veterans do this as a real estate broker for the last several years. In fact, this is my main focus as it combines my two niches in real estate: veterans and multifamily properties. These make up the core of my business and I absolutely love when I get to combine veterans and multifamily together.
I’ve said this more than once and I will continue to say it until I am blue in the face: Using the VA loan to buy a multifamily property might be the biggest wealth building hack for veterans that I have ever encountered in my entire life. If it makes sense for you, your financial situation, and your family, doing this and doing it right (very important) can permanently change your financial situation for the better. This is where the story begins — but first, the TLDR version: I helped a veteran buy a $965k 4-flat in Chicago using their VA loan with zero of their own dollars. There were a lot of crazy twists and turns and a lot of lessons were learned along the way, but our team makeup put the client in the best possible position to navigate the challenges and secure an awesome property with $0 out of pocket at closing.
🎬 The Setup
I was recently introduced to an Air Force veteran who was interested in leveraging his VA loan to buy a multifamily property. This is not an uncommon request and I get it on a pretty regular basis. Great start, so let's get hunting! After zeroing in on his location preferences, determining his VA loan entitlement, and getting him pre-approved by a fantastic lender (shout out to Tommy Storino with Neighborhood Loans) we hit the ground running. He was looking in Chicago's West Town / Ukrainian Village neighborhood, an area near and dear to my heart, as I’ve sold several buildings there, purchased a few myself, and operate a property management company based there as well. There is still a lot of good value in this neighborhood, and a lot of homes that have been mismanaged over the years that have either deferred maintenance or very below-market rents. I love targeting mismanaged properties as they tend to have a lot of future upside and potential. We narrowed our search down and isolated 3-4 potential contenders on which to run a basic cash flow model. There was one clear outlier - a 4-flat in the heart of Ukranian Village - and we made an offer.
Here is how I structured this deal for maximum success for my client:
I made sure to work the numbers with the lender. I cannot stress this enough: TALK WITH YOUR LENDER. He was able to transform 75% of the rental income of the remaining 3 units in the building (i.e. the units the buyer would not be living in) to help increase his purchasing power. The lender blessed off on the numbers and we started crafting the offer.
I knew cash was a bit of a constraint for my client, and I knew there was some deferred maintenance on the property. Plus the property had been sitting for a few months, so after a few phone calls to the listing agent I figured out they were ready to make a deal. We structured our offer with a purchase price of $965k (asking price was $985k) with a $25k credit. This may sound a little aggressive (depending on what market you are in), but the building had rents that were WAY below market and the owners had little to no mortgage left and were looking to 1031 the cash into another deal.
This might be the most important step in the process for the client, but I had to educate the listing agent on the VA loan, its related processes and guidelines, and why it is such an awesome tool for our veterans. This agent had never worked with a veteran, never seen a VA loan, and certainly never had anyone buy a multifamily property with it. After calming her nerves a bit and walking her through not only the process but MY experience with past VA loan / multifamily transactions, I was able to get a deal together at just $10k above our initial offer — we were ready to hit the ground running. Who you are working with becomes extremely important here, because sometimes we have to sell the VA loan pretty hard to agents who are afraid of them or just unaware of how they work.
Some elaboration on the closing credit: This is a tool that I leverage a TON here in Chicago to help my clients. A closing cost credit is different than a price reduction. A price reduction will lower a buyer's monthly payment, and potentially drop their down payment. Since the VA loan is a 0% down product, a price reduction barely moves the needle at all for out-of-pocket expenses at closing. A closing cost credit, however, directly offsets closing costs (as its name suggests) which has a direct impact on how much money the buyer must bring to closing. Some notes: Lenders have to approve credits and closing cost credits cannot offset down payments, so communicating with your lender on this step is paramount. In a scenario where you do have to bring a down payment to closing, the credit can't be large enough to eat up both closing costs AND down payment money.
If you are able to negotiate more credits than the lender is allowed to take, there may be more creative ways to use this excess credit, such as buying down points, paying off debts, or directing money to an escrow account to pay for contractor work post-closing. Always consult your lender before “being creative” if you find yourself in this situation.
🎢 The Roller Coaster
So we got the client a large credit. Big deal, right? It gets better…
This next part is not likely to happen in any other transaction so don't take this as advice or common practice. The seller’s attorney somehow neglected to establish an earnest money account at the start of the deal, despite being directed to do so. Like I said, this RARELY EVER HAPPENS. By the time he remembered, we were literally a week from closing and our lender convinced them to waive the earnest money requirement completely. Although it would have been only $5k for our client, it was still money he didn’t have to pay out of pocket during the process.
The initial timing portion of a contract period is referred to as ‘A/I’ or the Attorney Review/Inspection period, which typically spans 5 business days (or more, depending on the situation). During this time, the attorney team will review the contract, the client will have an inspection, and basic due diligence is done on the property. The first thing that I do as an agent is start to work on the due diligence piece right away. Having done this many times now, I know exactly what to ask for from the sellers and what information to look up (if I haven't already done so). Here is a basic list of information I research during this time (though some items may not always be relevant to your specific situation):
Copies of all leases
Certified rent roll (make sure these mesh with the leases and have full contact info for all tenants)
Chicago buildings department search for violations or permit failures
Common area utility bills for last couple of months
List of any recent capex projects or large repairs
List of any external contracts on the property (i.e. trash, landscaping etc.)
Trailing 12 month (T-12) financials
Current year and prior year P&L
Tenant delinquency report or any bad debt on the property
Copy of current insurance policy
Estoppel certificates which validate a tenant's lease details. This is important to verify that tenants don't have a side deal going with the current owner for a reduced rental amount, free months rent, free utilities etc., and also confirms who owns what mechanicals and appliances.
Seller property-specific tax returns (sometimes, depending on the property and situation)
You may encounter some pushback on some of these items, but many are important pieces to the puzzle. The most important are likely the leases. Review them very carefully to identify any unusual clauses. Understand who holds a security deposit, who has a pet, who has a parking space, and when the tenants first moved in. Finally - and you will definitely want to do this prior to getting under contract - you want to ensure that there is a unit that you can occupy in the first couple of months. There either needs to be a vacancy, a lease ending soon, or someone with a kickout clause in their lease. In the case of this property, there was a tenant that agreed to leave within 30 days of our closing so we were able to satisfy the owner-occupant portion of the VA loan. The most significant discovery was that two tenants were on month-to-month leases, and they couldn’t locate the lease for one tenant who had been there for over 12 years without a rent increase (gotta love a clear case of mismanagement!).
At the same time as our due diligence, we conducted an inspection, which, unsurprisingly, revealed some interesting findings typical of a 100-year-old building that has endured many harsh Chicago winters. We had to get a special roof inspection because there was literally no hatch to access the roof; We also did a sewer scope with my main man Jim McDarrah who is THE GUY in Chicago for sewers. The scope amazingly came out clean which is what I love to see (I highly recommend these types of inspections to my clients as they can point out some serious issues). Some of the initial findings were serious, some were not. We lobbied hard to get either a credit for the work or for the issues to be remedied prior to closing. The sellers agreed to fix some of the issues (which isn’t usually my preferred solution in these situations) and refused to offer any additional credits, having already provided us with a substantial one. Keep this in mind for the end of the story.
By now, the inspections and attorney review were pretty much wrapped up after some letter exchanges between the attorneys. So far my client is out of pocket for a main inspection of a four-flat ($750), a sewer scope ($300), and a roof inspection ($350) totaling roughly $1400. We now have two more items to complete for a VA loan: the appraisal and the pest inspection. The VA appraisal is the element of a VA loan that probably scares unsophisticated agents the most. It’s similar to a standard appraisal in which the property’s value is assessed, but with VA loans the appraiser also examines any elements of the house or building that may present safety concerns. The most commonly identified items in Chicago (in my experience) are chipped paint (because of lead based paint which exists in any building built prior to 1978), safety issues like handrails on a stairwell, or other obvious issues that might pose a risk to the homeowner or their family. I have had appraisals come back with zero conditions and I have had them come back with 2-3 dozen conditions. I once had to paint my own deck in the middle of winter when refinancing my house due to chipped paint. These issues normally have to be addressed prior to closing, which often creates another potential friction point in the deal. I could dedicate an entire blog post to some stories on this subject, but for this particular building, the story is uneventful: the appraisal came back at value and with no “conditions” which was awesome news! The pest inspection didn’t go well; traces of previous termite activity were found in part of the basement. This prompted the lender to require remediation. The seller agreed to handle the remediation, and we proceeded with the deal. No drama, no extra cost to my client.
From this point on, most deals are pretty smooth sailing; we just have to get the clear-to-close. Well, there is one pesky detail with multifamily buildings in Chicago that people often forget about: the zoning certificate. A zoning certificate in Chicago is essentially the city's stamp of approval on how many legal units a building has. Zoning certificates can be challenging. They are somewhat subjective, valid for only a year, and subject to potential changes. I’ve seen buildings that had a zoning certificate showing 3 units one year, and then when pulled again a few years later showed only 1 legal unit. One more fact to note: Zoning certificates are only required for buildings with 2-5 residential units (the critical word here being “residential”). This would include a 6-unit mixed-use building with one commercial unit and 5 residential units — it still fits the “residential” portion of the profile so it still needs a zoning cert.
So where are we going with this? You guessed it, the zoning cert came back as 3 units, not 4. We now have a HUGE roadblock on our path to closing. This would mean that one of the units was not "legal" or "conforming" in Chicago's eyes, and hence would not be "rentable." This is a big deal because the overall value of the building is at stake. We pulled everyone into a meeting to war game the scenario and figure out what a path forward would look like. Naturally, the seller’s attorney was at a Billy Joel concert and unreachable (not Billy Joel’s fault), so we had to brainstorm options and solutions in their absence. Ultimately, we decided to withhold some funds in escrow to address the possibility of the building having one unit less than its listed and expected total unit count. We agreed $75k was a safe number. After closing, the attorneys would need to figure out how to get the zoning certificate to reflect 4 units (it’s clearly a 4-unit property and the rationale behind the 3-unit zoning certificate is still unclear). If the certificate is not updated to show 4 units, my client receives the $75k; if it is updated correctly, the seller gets their money back.
Now we’ve made our way through the zoning drama and think we’ve cleared the final hurdle, headed toward the clear to close, the final walk through, and to the closing table. We got a CTC a week ahead of schedule so we opted for an earlier than expected closing date (which is always great news). The morning before closing, we conduct the final walkthrough. This is when we inspect the units to ensure they are in the same condition as our previous inspection, and that any agreed-upon issues have been resolved. We got through the units without any hiccups, but when we finally reach the basement where the seller had committed to several repairs, including beam and support work, we discover that absolutely nothing had been done. Not a single agreed-upon task had been completed!
Our first move was to call the agent, who basically shrugged her shoulders and said “sorry” and that she “didn't have anything to do with that” (this is NOT an acceptable answer, to be clear). Next, we called our attorney, the amazing John Brennock with Diaz, Anselmo and Associates. He calmed me down and said we have some options. We get the ol’ war party on the phone again and agree to hold back an additional $25k in escrow, which now amounts to $100k total. Now, my client has the option to complete the work himself and be reimbursed from the escrow account, or the seller could fulfill their commitment and complete the promised repairs. The issue is resolved for now.
💵 The Payoff
We finally arrive at the closing table. AMEN (I know this is a long story, but this is where it gets good). The final closing disclosure is reviewed: After some lender credits, removal of his VA funding fee (due to his disability rating), and Cook County seller tax credits, our client had to come to closing with ZERO dollars! In fact, there were more credits available than he was able to use for closing costs so some of the money was used to pay off an outside debt. This was an absolutely AMAZING outcome. I walked out of the closing giggling with our client, feeling like he had just stolen something. When I say that using the VA loan to purchase multifamily properties is a huge wealth hack for veterans, I truly mean it. The twists and turns in this story are not always the norm, but in many cases I have seen people come to the table with $20K or less and successfully purchase million-dollar-plus 3 & 4-flats.
Ah but there’s one more thing… I said before that our client had to come out-of-pocket for those inspections, right? $1400 I believe it was. Well, because he was part of the Homes for Heroes program, he got back a nice check after closing totaling more than the $1400 required for the inspections, truly making this a completely zero cost transaction. Homes for Heroes partners with lenders and agents to give back to Veterans or Active Duty Service Members, Health Care Workers, Firemen, Policemen, EMTs and Teachers, so if you fall into one of those categories, definitely apply! It is free money after closing - just collect the check.
So what lessons did we learn while on this adventure? Let’s summarize:
👥 Who you work with matters: agent, lender, attorney, inspector, and anyone else on your team. Everyone involved is critical to the process. Build a strong team that is experienced with the VA loan and multifamily deals, and who can be creative with strategy, offers, money, and process.
🚀 If living in a multifamily investment property is suitable for your situation and your family, I highly encourage it to get your real estate journey off to a rocketship start.
📚 Understand the rules of the VA loan. There are a lot of requirements. Talk to a lender who can help you navigate the process. Don't try to cheat the system — it’s not worth it.
💡 Multifamily is a whole different ball game to single family purchases. Understand the nuances, rules, and risks. Hire a skilled property manager if you are not qualified or capable of handling tenants or maintenance issues when they arise.
So no shit, there I was, deep into another adventure in real estate. This deal, focused on helping a veteran use a VA loan to buy a $965k 4-flat in Chicago, was a prime example of why I love what I do. It’s a niche where veterans and multifamily properties intersect, offering incredible opportunities for wealth building. Along the way, we faced unexpected hurdles that taught us valuable lessons, and learned the importance of having a knowledgeable team - from lenders to attorneys to inspectors - who understand VA loans and multifamily investments. Building a strong team and mastering the intricacies of VA loan rules are crucial. This journey highlighted that success in multifamily real estate requires strategic planning, thorough due diligence, and a team that can adapt and innovate. It’s not just about closing deals; it’s about navigating complexities and seizing opportunities that can transform financial futures for our clients.
