Weighing options for first move on real estate journey

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Weighing options for first move on real estate journey

Kyle Crane
Member since 2022 · 9 posts · 1 vote

We are ready and looking to buy our first rental property, but are also considering moving to another primary residence in the near future now that home prices are decreasing slightly. Is it possible to do both?

We bought our current residence with a VA loan and it's a 4BR 2.5BA single family residence, built in 2018. We have a 2.55% interest rate and over $150,000 in equity. I feel both of these provide an opportunity. Here are the options I see using a HELOC:

Do a HELOC on our current primary residence and use that for a down payment on a new primary residence, then rent out our current SFR. Running the numbers, I think it would generate decent cash flow. In doing this, however, I feel it would halt our momentum into investing as we would need to wait to save up more money or gain additional equity to use towards another investment and who knows how long that could take.

Do a HELOC on our current primary residence, stay in this home, and use the equity to buy one investment property locally. Home prices in my area are still very inflated so a majority, if not all of the money from the HELOC would go towards a down payment (thinking 20%).

Do a HELOC on our current primary residence and use that to invest in 1, 2, or maybe even 3 properties in a different part of the country where prices aren't so high. That would require getting in touch with a team on the ground in said area.

I'd like to stay local for at least my first deal if not the first couple just to learn how to manage, but that may not be the best move. How can I accomplish both? Are there any other options I'm not seeing? Would using a VA loan again and putting less than 20% down on an investment property be a bad idea?

Any advice or alternate ways of looking at our situation would be much appreciated!

 

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  • Joel Allen
    Rental Property Investor · San Antonio, TX (Lender in TX and SC) · Member since 2020 · 196 posts · 253 votes
    4y

    @Kyle Crane

    It sounds like you're agreeable to moving to another primary residence. So before jumping into a HELOC, I'd recommend determining if you have remaining VA loan entitlement. If so, you may be able to purchase another home (to serve as a new primary residence) using that remaining entitlement, and convert your existing home into a rental (as long as you've lived there for at least a year). That would enable you to keep the low interest rate (2.55%) on your current home, and utilize the VA loan again with no/low down payment for a new primary residence.

    Your VA Loan Certificate of Eligibility (COE) is the definitive way to determine if you have remaining VA loan entitlement. You can either have a lender pull your COE, or you can retrieve it yourself from the VA eBenefits portal.

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  • Erik Browning
    Lender · CO CA TX WA ID OR · Member since 2020 · 419 posts · 542 votes
    4y

    Hi @Kyle Crane, like @Joel Allen mentioned using your remaining entitlement might be a good idea - depending on how much you have left. It sounds like you have a family that would be making a move with you as well. Before we get into the technical stuff on how to maximize your VA loan, make sure you and your family are all on board prior to starting this journey. It sounds like they are by how you're writing, but a solid plan and team around you to properly advise you to start cash flowing on day one is critical for not only the assets you possess but for the overall wellness of your family.

    That being said, get the HELOC. Just because you have access to draw from it doesn't necessarily mean you have to use it, but if the right opportunity comes up it's good to have available as long as the future deal makes sense. And of course, don't draw too much from it so that it eats away at your potential gains on your next property.

    I love talking about split entitlement for VA loans and also advising active duty and veterans on how to utilize their benefit to the max. Here's a secret - you can get 4 VA loans if you do it right. So yes, get the HELOC on your primary, learn more about investing, look for a new primary so you can rent out your departing residence, and also use other conventional methods of investing that are found throughout the forums. But most importantly, make sure everyone is on board.

    1Reply
  • Kyle Crane
    OP
    Member since 2022 · 9 posts · 1 vote
    4y
    Quote from @Joel Allen:

    @Kyle Crane

    It sounds like you're agreeable to moving to another primary residence. So before jumping into a HELOC, I'd recommend determining if you have remaining VA loan entitlement. If so, you may be able to purchase another home (to serve as a new primary residence) using that remaining entitlement, and convert your existing home into a rental (as long as you've lived there for at least a year). That would enable you to keep the low interest rate (2.55%) on your current home, and utilize the VA loan again with no/low down payment for a new primary residence.

    Your VA Loan Certificate of Eligibility (COE) is the definitive way to determine if you have remaining VA loan entitlement. You can either have a lender pull your COE, or you can retrieve it yourself from the VA eBenefits portal.

    Thank you! I’ll look into the VA COE and see what I have left. I did not know about that. 
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  • Kyle Crane
    OP
    Member since 2022 · 9 posts · 1 vote
    4y
    Quote from @Erik Browning:

    Hi @Kyle Crane, like @Joel Allen mentioned using your remaining entitlement might be a good idea - depending on how much you have left. It sounds like you have a family that would be making a move with you as well. Before we get into the technical stuff on how to maximize your VA loan, make sure you and your family are all on board prior to starting this journey. It sounds like they are by how you're writing, but a solid plan and team around you to properly advise you to start cash flowing on day one is critical for not only the assets you possess but for the overall wellness of your family.

    That being said, get the HELOC. Just because you have access to draw from it doesn't necessarily mean you have to use it, but if the right opportunity comes up it's good to have available as long as the future deal makes sense. And of course, don't draw too much from it so that it eats away at your potential gains on your next property.

    I love talking about split entitlement for VA loans and also advising active duty and veterans on how to utilize their benefit to the max. Here's a secret - you can get 4 VA loans if you do it right. So yes, get the HELOC on your primary, learn more about investing, look for a new primary so you can rent out your departing residence, and also use other conventional methods of investing that are found throughout the forums. But most importantly, make sure everyone is on board.

    Appreciate the insight, that’s a big help. I’ll start there. 

    so how do I get the 4 VA loans you referenced?
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