Looking to dive into first rental in So. Cal. Use VA loan?

Question

Hello BP community,

Wanted to share my current plan. Welcome any feedback and suggestions. Thanks in advance.
summary:
10yr goal- Cashflow 10k in passive rental income.
Currently W2 employee. Single income. Family of 5. Veteran
Currently own single family in Corona, Ca. Est Value: 630k. Balance on loan. 460k

For my first property, Since I do not have a lot of capital, was looking to reuse my VA benefit. Currently refinancing my current to a conventional So it can free up the VA.
Since it’s VA my understanding is I have to live in it for at least a year. So, I will rent out my current home. after refi payment should be around 2850. Neighbor across street in same model just rented theirs for $3300. So projecting 300-400 cashflow If all goes well.

i know there’s probably a lot I’m leaving out but wanted to sanity check this plan. I also thought of cash out or heloc for a down payment for the new property (wouldn’t need to move).

For my 10 year plan I’m open to any suggestions on a primary strategy to get there. Specifically with California market in mind. Also, would really be interested in hearing from those that have BRRRR’d in or around my area.

Thank you all. Literally just registered on this site and very excited to learn.

Carlos

Carlos Teves · Answer

@Aaron K. Got it. Thanks for your feedback. Appreciate it.

Aaron K. · Answer

@Carlos Teves a landlord policy is usually less expensive than a homeowner's policy, however I don't know how the pool will affect that, because if god forbid someone in your own family had an injury or drowned you wouldn't sue yourself, where a tenant might.

Carlos Teves · Answer

@Aaron K. Thanks for annual repair est and the info re pool. What did you mean by “on the insurance front the good news is that it may be less expensive”?

Aaron K. · Answer

@Carlos Teves, some other things to consider, with that info that will make your home a bit more difficult as a profitable rental.

The pool is really going to hurt, I would not trust a tenant to properly care for it therefore you probably want to add pool service on top of your mortgage, property taxes, insurance and repairs. Also be aware of all the various regulations for door/ window alarms etc. required for having a pool. On the insurance front the good news is that it may be less expensive than your homeowner's insurance but it will be much more costly than a home without a pool.

As for repairs/ maintenance my most similar unit would be about 6% of the rent per year historically. When I'm evaluating something I usually use 7-8% and that is more in line historically with the 1980s units.

As always with self managing, know the laws and screen properly and you'll save yourself a lot of headaches.

Carlos Teves · Answer

@Aaron K. Yes, it includes PITI only. No melo Roos. Did leave out the HOA which is $45/mo. Plan on self manage. Is there a gen guideline to get a maintenance/repair #? Home built in 1990, 2100sqft/pool. property is in Sierra Del Oro, off the green driver exit/91. Thanks

Aaron K. · Answer

@Carlos Teves does your payment include property taxes and insurance? If not make sure to factor that in. Are you planning to self manage? If not factor that in as well. Also things will break so be sure to budget for repairs. I don't know where in Corona this is but it seems like based on price point you may have Mello Roos, I'd try to stay away from that in your next home if possible.

Looking to dive into first rental in So. Cal. Use VA loan?

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