First investment property

5 Replies

Hey everyone! Just wanted to share my experience with my first investment property and get some discussion going!

When I bought this property I was 21. I used an FHA 203K loan to fund it.

I didn’t even have money for the down payment so I borrowed from a friend. Here are the details!

Purchase price 95k (short sale)

Wrapped 15K into the loan for floors, kitchen, and bathrooms to be updated.

1100 sq ft 3bed 1&1/2 bath

Total mortgage 110k

ARV is about 140k

Not the best numbers but I needed a place to live quickly and knew I'd have some equity with low risk and be able to cash flow easily.

I currently live in the house and I’m looking at my options of buying another house and renting this one out. Should cash flow about 500/mo

What would you guys do if you were in my situation? I have before and after pictures of the project but wasn’t able to figure out how to attach them so let me know if anyone has any suggestions on how to share them!

@Nathan Doherty - congrats on the first investment property! If I were in your situation I would consider paying down the current mortgage to get some more equity/leverage in your property. If you're not occupying all of the bedrooms maybe you could even rent one out for additional income. Once you have some more equity you could refinance and use the cash to purchase your next rental property.

@Damian Bialonczyk great ideas! I am married and the wife is not onboard with a roommate. But I am in the military so I still have a VA loan available. What we are considering is buying another property with the VA loan and moving out of this one to start cashflowing.

I have a friend in the military that uses that strategy. He buys his houses with VA loans, lives in them while he flips them, then rents them out when he moves. He has a wife and two kids, so it's a viable strategy if your family is up for it. Cash flowing for $500 a month is nothing to sneeze at either.

@Nathan Doherty Thats awesome! Now if only I had done something similar at 21...

Definitely get a jump on using the VA loan.

Buy another property that qualifies for a loan but needs some additional work. Always a balance there as VA loans don't typically qualify for heavy value-add or renovation properties.

Rent out the previous property. Even look at taking a HELOC for 100% LTV on the equity of the now investment property. This would mean 30k in equity for you, which will help you renovate your now VA loan home or use on another investment property.

Renovate the newly VA loan home bought at 0% down using the HELOC funds.

Deduct the HELOC interest from personal tax returns as it is being used primary residence renovations. Work with a CPA on this one but a major advantage to using a HELOC.

Repeat every 2 years or even every 1 year or every duty station. Eventually, you will have access to other strategies and can adjust as needed.

Hope that helps!

@Chris Levarek

WOW! Thanks for all of that! I knew I was on the right track but I didn't realize you could get a HELOC for 100 percent LTV and the tax break is just another bonus! I'll have to talk with a lender about the HELOC because that extra cash would really open some more doors for me.