Which route makes the most financial sense

Question

A quick overview ,So my wife and I have our own property fully paid off.  We own a duplex that we put $150,000 down 3 years ago using a HELOC that we still have access to on our primary residence that is now paid off.  Also I have the ability to use a VA loan for my primary so I would not need to put any money down on new primary.  Our house is worth about $350,000 and the duplex other than the equity we put in with the down payment does not have much Equity at all.

I don't know what the best course of action to do is if I should just pull out my $150,000 heloc again and buy another $500,000 duplex and keep doing that over and over again. Or should we sell our primary take the $350,000 buy two new duplexes and then buy a primary with zero money down with my VA loan.

Third option is just keep saving up money since our house is paid off and every couple years by a duplex with our saved money

Andrew Postell · Answer

@Jeremy Muehlbauer there's probably no "right" or "wrong" answer here but keeping your properties as is and buying another home with 0% down seems like a pretty good option to me.  I love my VA loans and the houses I purchased with them.  Just a thought.

Henry Clark · Answer

If you have lived in your Primary Residence house for 2 consecutive years out of 5 you don't have to pay any capital gain taxes if you sell.

You could turn around and buy another house and do the same thing all over again.

You could move out of your primary and and start another 2 year cycle on another house.  If you sell your first primary before the end of the 5 year period from the start of your original 2 year period your not taxed.  If you wait to long then the first house is taxed.  In a 5 year cycle you could even start a 3rd primary.

Talk with your Tax person.

The Heloc on your primary would go away if you sale.  You could pay down on the Duplex.  But you would still need to refinance.

Run the numbers.

Jeremy Muehlbauer · Answer

Thanks James,  definitely a different perspective than I thought I'd get on this question.   Would you be interested in chatting with my wife and I to see if there might be opportunities you and us could work on together?

James Hamling · Answer

Don't force it, that should be your underlying mantra.

You have access to capital to secure a new producing unit, great, your set there, done.

Unless you have a specific reason to liquidate the others, why do it?

So next what you should do is get your acquisition "team' going to just "fish" for that next great deal. Leave it to that. If and when a good deal get's snagged, then you make action decisions. Right now, it's all based on assumption.

The VA thing, I'd ignore that, seriously. Yes, 0% down is a good tool to have BUT you don't need it, you got that heloc available. And remember, when you go 0% down, your at 100% leverage, that's DEEP in the danger-zone. So it's not all great using 0% down, there is some risks to it.

Let the deal-flow direct your actions, that's how things best come out in the end. When you got a great deal and another and another, each growing your financial position, that's how it's done right. But it's directed by deal-flow, and action is enabled by capital access. It never starts with enlarging capital access, that doesn't bring "deals" it just brings purchases.

You need "DEALS" to grow a portfolio, not purchases.

Maybe it's also time to diversify a bit because $500k for a duplex is awfully pricy. I have an idea of what you got where for that, and that's why I say diversify. That $150k can buy you a whole lot used correctly. Than, with portfolio operating at capacity, that's when look at VA side of things and doing the primary-hop. Or maybe consolidate portfolio into a portfolio commercial mortgage because basing valuation on NOI vs market comps provides and added $300k equity?

Again, I advise to start with deal-flow.

Which route makes the most financial sense

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