First post and ready to buy! What do you think of my strategy?

[Paul Tan]

Finally got my headshot uploaded so I no longer have to lurk around the forums! XD

What are your thoughts on Starting Small (Cashflow) vs Going Big (Equity)?

Since I will invest in the Augusta, GA, I'm trying to figure out what strategy to take for the next 3-5 years. Here's the facts:
- I'm pre-approved for $330K but I can push it to $450K if I really need
- $10K-$20K Saved for down payment. $10K Saved for renovations
- Saving $800-$1400 every month
- I have access to the VA loan

(*preferred) Strategy #1: $100K-$200K purchase. ~$1000 Mortgage. Rent for ~$1000. Rinse/repeat once I can ReFi for 75% ARV. 1031 in 5 years.
Strategy #2: Buy a SFH in a subdivision for $300K+, waiting until I have enough cash/equity and buy again. HODL.

Here are my pros and cons for each:

### $100K-200K ### <-- More Active Investment
Pros
- Higher Price to Rent Ratio
- Fast turnaround to purchasing next property (6 month before ReFi)
- Value Add repairs can improve house value a lot
- 3-4+ purchases in 5 years = More Learning Opportunities/Networking

Cons
- Higher Risk of Bad Tenant
- Maintenance Repairs
- Lemon Purchases

### $300K+ ### <-- More Passive Investment
Pros
- More equity to draw from down the road
- Good Neighborhood
- Family Tenants are safer

Cons
- Higher Operational expenses (Taxes, Insurance)
- HOA Limitations
- Typically recent builds/renovations so not much room for Rehab
- 1-2 purchases in 5 years = Fewer Learning Opportunities

I know that there is no one solution. Also, specific advice depends on me providing more details. But I always like to hear more new perspectives! So hit me with everything you've got!

[Richard Capers Jr]

Quote from @Paul Tan:
Finally got my headshot uploaded so I no longer have to lurk around the forums! XD

What are your thoughts on Starting Small (Cashflow) vs Going Big (Equity)?

Since I will invest in the Augusta, GA, I'm trying to figure out what strategy to take for the next 3-5 years. Here's the facts:
- I'm pre-approved for $330K but I can push it to $450K if I really need
- $10K-$20K Saved for down payment. $10K Saved for renovations
- Saving $800-$1400 every month
- I have access to the VA loan

(*preferred) Strategy #1: $100K-$200K purchase. ~$1000 Mortgage. Rent for ~$1000. Rinse/repeat once I can ReFi for 75% ARV. 1031 in 5 years.
Strategy #2: Buy a SFH in a subdivision for $300K+, waiting until I have enough cash/equity and buy again. HODL.

Here are my pros and cons for each:

### $100K-200K ### <-- More Active Investment
Pros
- Higher Price to Rent Ratio
- Fast turnaround to purchasing next property (6 month before ReFi)
- Value Add repairs can improve house value a lot
- 3-4+ purchases in 5 years = More Learning Opportunities/Networking

Cons
- Higher Risk of Bad Tenant
- Maintenance Repairs
- Lemon Purchases

### $300K+ ### <-- More Passive Investment
Pros
- More equity to draw from down the road
- Good Neighborhood
- Family Tenants are safer

Cons
- Higher Operational expenses (Taxes, Insurance)
- HOA Limitations
- Typically recent builds/renovations so not much room for Rehab
- 1-2 purchases in 5 years = Fewer Learning Opportunities

I know that there is no one solution. Also, specific advice depends on me providing more details. But I always like to hear more new perspectives! So hit me with everything you've got!

I'm in the Augusta market as well. Why don't you put nothing down with your VA loan? Then in a year or so use the loan again for another purchase? There's a potential to use the maximum eligibility with these 2 purchases but you can House Hack them and increase the cash flow vs market rates in the area.

Save your cashflow and your down payment money then with the 3rd purchase go for a FHA loan 3.5% down with the amount you made. Move every 12-18 months until you are tired of doing it.

[Erin Church]

I agree with a lot of what Richard said (he's a pretty smart dude!). :) 

For me, the largest chunks of money I've made are doing live-in flips. So, I'd consider buying a very dated house that is a great price in a great area, then fix it up while you live there and sell after 2 years. The money you make is tax-free if it's your primary 2 out of the last 5 years (if you rent it for a while, I believe there are some taxes, but it's prorated on time based on what I remember - not tax advice). A single person can profit $250k without paying taxes. 

If it didn't appreciate enough/you won't make enough to be worth selling, it will likey make a pretty good rental. (Again, if you bought well and did the work over time, should be a pretty good value.)

You mentioned, "Family tenants are safer". Unless you are house hacking, please don't rent to family... or friends... or friends of family... or family of friends. This goes sideways sooooo often - professional lines are easily blurred (or erased) and bad things for the property owner can happen. It can still be risky when living under the same roof as the owner but seems to be terrible less frequently. :)

I would also suggest avoiding an HOA - it's an extra expense obviously, but their rules can change (like rental restrictions).

[Benjamin Sulka]

I love the idea of a live-in-flip like Erin presented. 

Have you looked into house hacking? You could benefit from low money down (or you could use your VA eligibility) and live in the property while renting out rooms or other units.

You can do value adds while you live in the property and when you're ready to move out, you can either sell it or continue to rent it. Like a live-in-flip combined with a house hack. 

[Julien Jeannot]

I'm a fan of creating equity, it the fastest way for new investor to move on to their next deal. Cash flow alone does not kick out enough cash for the next one.

In your cash with a VA loan, I'd find a cosmetic duplex-fourplex and househack it. Best of both worlds.

[Gerald Harris]

@Julien Jeannot duplex - fourplex is a great idea.   rent to traveling nurses for higher then normal rents in order to rent those units is great for stronger cashflow.   

[Travis Rogers]

Already some great ideas here. What I would caution against is being a landlord in an area with a high risk of bad tenants. In those areas, regardless of what your cash flow appears to be, nonpayment, vacancies and damage to the property can ruin any cash flow, I've seen it happen to people. Plus, it can be a headache. 

Maybe find a mid-tier neighborhood, with working families and a good school district. This has been one of my approaches. When rentals are hard to come by due to demand for a school or area, it's easier to rent them quickly when vacant, and typically you'll get a good family in who wants to be there for a bit. House hacking is huge if you can do that as mentioned, live there 2 years and then you can move and sell to avoid any capital gains tax (or move and hold as a rental if rents appreciate). Value add properties would be huge here since you could do the work yourself to increase the value, while living there, and learning the fix-up process, etc.

You're on the right track, looking at pros and cons and analyzing. Keep in mind it's a long term game and if you keep playing in the end it pays off. Personally I focused on SFR's initially, and used that eventual appreciation to help scale into commercial. Great post, all the best to you Paul!

[Brendan Natuzzi]

I've run into a few agents looking specifically for VA buyers (this is in AZ, not GA) however, this is because VA loans are assumable - you would be able to take over the current owner's mortgage, and therefore their (much lower) interest rate. Depending on how the specific property pencils out, this could be a good opportunity to maximize monthly spread.