Last year I purchased my first home in Clarksville, TN using my VA loan. Looking back after the year I think I made a small mistake. I purchased my home for $180,000 and put down $15,000. In hindsight I think I should've used the FHA loan and saved one of my VA loans.
Bottom like up front, my plan for my first 3 homes was going to be this:
VA loan, rent that one, use VA loan in same town, live in that one, purchase a rental home with conventional loan.
My plan in the past few months was to use my VA loan again and purchase another home in Clarksville, however, plans have changed. Basically what I discovered is that in order to purchase a home that I'd like to live in I'm looking at spending at least $215,000 for a 3 bed, 2 bath, 1,500ft home. I'd move out of my home and rent it for $1,300 while my mortgage is $850. I'd cash flow $450 and I'm happy with that as someone pays off my mortgage and makes me money. But for the home I'd like to live in in this market my mortgage would be about $1,100 and the properties would rent for $1,300 on average. That just doesn't make sense to me.
I’ve now begun to look into putting money down on SFHs using a conventional loan. I can put up to $40,000 down and this allows me to buy homes $175,000 and under. With this plan my mortgage would be around $850 and the homes would rent for $1,200-$1,300 on average. Again, I’d be cash flowing $350-$450 while someone else pays for my mortgage.
I plan on getting out of the Army in a year and will most likely use my VA loan again to purchase another home when I move. So I basically just flip flopped using my VA loan and the conventional loan.
Can someone with more experience give me some insight on my plans?
1. Should I have used the FHA loan?
2. What do you recommend with purchasing a home? Clarksville is an exploding market and homes are appreciating very quickly and do not last long at all as more and more business move here.
3. Is it a bad thing if I’m only cash flowing $200-$300 per home? I am happy with that.
Side note: I’d love to purchase a MFH but right now those are very few and far between in the town.
I know this is a lot to go through but I’m just looking for any mentorship and help!
Thank you in advanced for your advice!
@Kevin Ryan I am a local real estate agent and fellow investor. You have a lot of questions there so I will keep it surface level but happy to hop on a call if you shoot me a message and dive deeper in.
First, you need an experienced lender who deals with what you are trying to do. Both FHA and VA require you to intend to occupy the property, you can't have more than one FHA loan at a time. Honestly, I don't see any reason why you want to use FHA at all, VA is 0% down and there are strategies to use it multiple times. Conventional loans can have a down payment as low as 3.5% but again, you have to intend to live there or as some would say you are committing bank fraud.
Also, our market is currently experiencing historically low inventory, but there are still decent deals out there that should get you better cash flow before maintenance and capex or mgmt. I just sold a duplex cash flowing at $180k in great condition and a SFH for $115k that will rent at $1200+.
Shoot me a message and maybe I can help further.
I agree with everything that Rylan said above and would like to add that unless you are putting down a large down payment you will also have PMI on the FHA loan (which will reduce your cash flow). I am about to build 3 duplexes off Ft. Campbell Blvd and might be interested in selling them. Also, I would suggest you do some marketing to find the deals that are NOT on the MLS so you do not have so much competition. We have purchased 2 so for this month and have 2 oil the pipeline.
So I already used my VA loan and am not going to use an FHA loan and was just curious if that was the right move or not.
I am currently in the process of searching for homes off the market and have had some success. How do you find your properties that are off market?
I do a lot of marketing. My marketing is different than others. I tend to go away from the heard.
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