I need help on planning my next step on a turn key rental.

5 Replies

I need help on a certain scenario I am in. I am currently in my due diligence period on a single family property in Jacksonville NC. Basically I don't know what I have regarding to the BRRRR strategy. I am looking at a single unit in a duplex for $58,000 that was just appraised at $58,000. It looks beautiful cosmetically but has some underlying issues that the seller has agreed to fix. I am using a VA loan with no money down. It being a VA loan I have a buddy (roommate) that will pay $700 a month to rent out his room. (VA loan requires this be my primary residence until I move, refi, etc.) My mortgage, property tax and insurance are running $450 a month. (I have all the details on the Bigger Pockets calculator) with all my Cap ex, vacany, and such accounted for. It only cash flows at $25 a month. I'm new to this but my REA recommends treating the property as my own home until I get out of the military in a year or so, at which I can rent it out without having to worry about VA loan stipulations. How do I force equity out of this home to refinance and use to aqquire another rental property? Is there even any equity in this home? I apologize for any confusion, I'm new to this and feel a little bit over my head. I knew I needed to start somewhere.

@Edward Kiser I don’t know why you are buying a Tk. You are located in a good area. Let us people with no access to cashflow in primary markets like seattle california Hawaii buy this retail priced stuff.

I don't think that he is buying it from a Turnkey company, but I agree that he should look for more value. 

@Edward Kiser , look for a place that needs more work for a lower price and do the work over the next 2 years to add equity. Could still rent out a room which could pay the mortgage.

@Edward Kiser

To second what Scott pointed out - if you're buying at market value (paying about how much the home is worth) and putting 0% down, your initial equity in the home will be $0.

There are two ways you can build up equity - the first is loan pay-down. As you pay off your loan, a little every month, your equity will increase. However, it will take many years to get to the 20% equity this way that you will probably need to refinance out of the VA loan into a conventional mortgage.

The second thing you can do is improve the property to increase it's market value. This of course isn't guaranteed and you need to carefully consider how much the property value will increase after any upgrades you do.

If the property value appreciates over time by itself, your equity will also increase.

If you are purchasing at $58k you are not using up hardly any of your VA loan benefits. When you move you can use your second tier VA loan benefits without paying off or refinancing the original loan.

One word of caution for when you do leave. Make sure you line up a job for when you leave the military to ensure you can get another loan. Lenders like to see at least 2 years at a job; it will look much better if you have a job related to your current MOS.

Best of luck!

It sounds to me like you are paying retail on the property. Do you know if there are any distressed assets in the market that you could purchase and renovate? That is the way to go IMO if you are looking to refi in 5 years or less. 

Either way, thanks for your service!

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