Opinions on next step

5 Replies

Hello BP community, 

I am another new investor looking to the BP community for some advice on what your opinions are for my next step in my investing career. I am currently active duty Army and just moved to the Tacoma/JBLM area in December 2019. I bought a 3/3 SFH using the VA loan in Yelm, WA with the intent of doing some renovations myself while we were living in it over the next few years and then when we PCS'd I was going to rent it out. I am actually way ahead of of my timeline with the renovations and am looking for some advice on what you all think would make the most sense for my next step. I bought the house for 350,000 and based off of the Redfin/Zillow estimates (I know there not exact) that I have been watching over the last year it has our house estimated at somewhere between 408k-444k. Once the renovations are completed I plan on getting the house appraised to get a more accurate number. Based off some of the comps in the area I think its going to be somewhere in the 420k-430k range. So I will have roughly 70k in equity. I also have roughly 40k cash saved up in order to continue investing in rental properties. The biggest question I have is should I rent my current house out without refi/heloc and utilize the 40k I have saved in order to purchase a rental property or pull equity out and utilize both? Houses in this area are really expensive and hard to find where the numbers work to create cash flow with just the 40k but it is possible. What do you all think is my best option to continue buying more investment properties. Sorry for the long post but any advice would be greatly appreciated.

-Andrew

You can always consider out of state investing, my guess is you will move in a few years so investing there and investing out of state are pretty similar. I would definitely keep the property especially if it will cashflow as a rental sounds like it is in a really good appreciating market. With the work you have put in you may be able to BRRRR out of the property and get the majority of your cash out to keep investing.

@Andrew Rich

Looks like you are in a pretty good spot congrats! In my opinion it really depends on what your goal for monthly rental income is as it sounds like you are after cash flow correct? If you can make 400$/month in cash flow does that meet your goal by leaving the equity alone? What would your return on equity be? What would the monthly cash flow be if you refinanced into a higher amount but lower rate (rates are very low now)? I would also make sure you check on how much of that equity is actually available depending on which bank you work with/what rate they will give you on a HELOC/REFI.

OOS may be a good option to look at for cash flow at lower initial capital requirements. 

@Andrew Rich If you want to pull equity you can, but it sounds like you don't necessarily need to in order to invest in your next property (good place to be). 

Have you looked into a VA IRRRL in order to lower your interest rate on the home, and expenses?

@Cole Simpson I have thought about investing out of state. I am currently looking at the market in the Cincinnati area as well, which is my home town. I have friends and family on standby to go actually put eyes on anything I come across that fits my search criteria. I'm a pretty hands on kinda guy and want to be able to see the property personally and do any minor repairs myself. While I know people have had great success buying out of state it's still one of those things that has me worried for my first few investments. The BRRRR method is a technique that would work, however in order to rent my current residence I would have to move out of my current house. If I utilized the heloc loan to pull cash out of my current house I could utilize both that money and my extra cash to purchase a true first rental until I did PCS to another location then turning my current house into another rental at that time. Does that make sense? And am I thinking about this correctly? Thanks again for your response and any advice will help.

-Andrew

@David Pere I have looked into the vairrrl loan. Mainly because as soon as we moved in I got about a million letters from lenders about it. If I didn’t do a refi/heloc loan in order to gain more money for my next investment based on the market here in the Tacoma area I don’t think my amount of on hand cash is enough to purchase a property that is in my criteria. I am looking to find something that is fairly turn key only needing cosmetic repairs. My plan was to utilize a conventional loan with 20% down and do the repairs myself. I plan on using a property manager due to my job being so unpredictable on when I will actually be in town since I travel a lot for work. What are your thoughts on using a refi/heloc loan to pull some equity out of my current house for repairs on my next investment and using cash on hand for the down payment? I am still researching more on how to, for lack of better words, manipulate the va loan to buy investment properties. Thank you for the response and any additional advise is greatly appreciated.

-Andrew