What To Do with First Rental???

Question

Hello Everyone,

I am Marine Corps veteran that was stuck in analysis paralysis. I finally was able to get out of the analysis paralysis after 3 years of soaking up as much real estate as possible. We did it, we leased out our house within 4 weeks of posting and cash flowing $660/month !! My wife(Vanessa) did all the hard work of posting the property and screening tenants. Thanks to Brandon Turners book on Managing Rental Property. My wife and I purchased our new primary residence using the CALVET loan. For any veteran rookie investors take advantage of the benefit. You do not have pay PMI and you can purchase house with 0% down. I have been learning a lot of the benefits CA veterans have here in California.

Situation: We purchased our rental property(old primary residence) in 2009 for $170,000, its currently worth $490,000. We currently owe $112,000 and have 7 more years to pay it off. Our plan was to get a HELOC and purchase out of state. While going through escrow, our real estate agent advised us not to apply for any HELOC or Refinance loans because it would screw up the closing process.

Question: Do we need to wait a couple of months to apply for the HELOC? Can we apply for HELOC now with proof that we care cash flowing? We want to pull out the equity and put the money to work.

Any advice tips is appreciated.Thank you!!!

Joe Villeneuve · Answer

Sell it yesterday.  You're losing money so fast it's frightening.  All that equity is dying on the vine, and wasting away, more and more with every increase in it.  Right now, your equity is only worth $490k.  It should be worth almost $2M.  Your CF is only just under $7k/yr, when it should/could be well over $20k/yr

Luis Barraza · Answer

Thanks for the tips. Another resource for you and your husband is the CalVet loan as well. Basically its a VA loan but CalVet you can qualify for more money. I qualified for $700,000 to purchase our current primary house for the VA I qualified for $650,000. Below is the contact for the CalVet the representative that helped me out. Another great thing for CalVet you can its called streamline refinance where you can refinance your loan every 9 months for free (no closing costs) as long as the rate drops 1%. David is very informative he provided a wealth of information. The representatives don't get paid commission they really care about veterans.

David Spalding

Property Agent | Loan Origination

California Department of Veterans Affairs

1227 O Street, Room 200, Sacramento CA 95814

916-651-9913 (Direct) | 916-651-9913 (Fax)

www.calvet.ca.gov

Patty C. · Answer

Hi @Luis Barraza Congratulations on all your action and success! You are on a roll and gonna be the next BP Superstar :-).

I will have my husband look into the VA loan programs and have him ask about the 0% down with no PMI. This is wonderful When was this implemented?

Just a heads up, California Apartment Association (CAA)  is a fabulous resource. There is a membership (and a voluntary fee that goes to lobbying for landlords).It has a legal hotline, contracts (developed by attorneys), lobbyists, updates on federal and state laws, local ordinances, etc. California is now a rent control state and tenant rights are strengthened at the city level so it is imperative to stay updated. Even if owners hire a management company, housing providers are still responsible for mishaps that may happen.

You can apply for a HELOC. HELOCS ties to an owner-occupied home have the best rates. If you have a 403(b) or 401(K), you may want to explore the possibility of borrowing from that, but inquire about how long you have to pay it back and how much it will cost you. You can borrow 50% of what you have in you account, up to $50K. There needs to be a portion put into a fund that is liquid.

Thank you for your service and continued good fortune to you and your wife.