HELOC vs Mortgage first time buyer

[Phillip Moreno]

Hello everyone. I'm 4 years from being able to retire from the military and dont want to work in gov contracting the rest of my life. I used the VA loan for my first home in San Diego and have 200k in equity that I would like to use that to get my feet wet in a rental property.

Going forward, should I use a HELOC or traditional financing method for my first rental property? I want to be as prepared as possible so every angle pros and cons would be greatly appreciated.

[Kerry Baird]

As a military member, if you occupy the house for 2 years out of 10 years, your capital gains can be excluded.  So you may have a tax benefit to holding longer, as long as this was your primary residence for any 2 out of 10 years. 

HELOC interest can be deductible if you use the money to buy income property. Or the IRRRL program to refinance that VA into a lower rate and pull cash out, might also make sense.

Here is my expensive guru course for military members...

When I got out, my goal was to buy 5 houses and use the debt snowball to pay them off rapidly.  I did 10 years and obviously didn't get a pension, so my thought was to make my own pension. 

We bought our first house in England and fixed it up and sold it for a good profit in pounds and made more on the currency exchange.  Bought a pretty house in Arizona.  Rented it out when we bought another fixer to live in.  Got aggressive in finding fixers to rent out.  Got orders back to England...10 years later, sold our house in England and had about the same amount of money as your equity.

Decided to buy 4 houses at $50k down, give or take, with a value of $200k each, near Air Force bases in growing cities.  We chose Texas and Florida, as they both are in the South (we didn't want water pipes to freeze) and we chose brick or block houses so we didn't have to mess with painting or siding as often.  We chose near bases, because we could work out how much housing allowance E-5s to E-6s, the broadest tier on a base, would make and allow us to make a few hundred dollars cash flow. 

We bought house 32 and 33 last year, and are still going...slow and steady. Hubby got out of the military 2 years ago, so we have his pension.  We always have had a fixer going, and we are still doing that, too.