All Forum Posts by: David Kinter

It's the area I am potentially going to retire in.

Isn't the 1% rule suppose to be calculated off of the purchase price?

1350 / 95000 = 1.42%

This is likely going to be a little long, so please bear with me.

I bought my current rental in 2012 as my primary residence with a VA loan amount of 95,000 @ 3.375 @ 583/mo PITI. In 2017, I was transferred and moved to a difference state. I started renting out my home the month I left for 1350/mo with a 10% management fee. I owe 82,000 to date. Currently, I suspect the home would sell for 180,000 based on the market and upgrades that have been done.

I have about 40,000 in cash that I'd like to use to purchase a 2nd rental home in the same area. The homes that I am looking at are smaller and priced around 100,000. Most of them I expect would rent between 900-1000. My wife and I have good income and great credit scores(740 her, 780 me).

I have been shopping around and the best offer I can find on a 30/yr fixed for an investment home is 4.125 with 25% down and the standard 6 months reserves for both my mortgages. This would put my PITI payment somewhere in the ballpark of 500.

I've come up with these options:

1. Buy 2nd home w/ 30yr fixed and carry 2 mortgages. Cashflow from home 1 650ish, cashflow from home 2 about 350 after all regular monthly expenses paid.

2. Refinance home 1 and pull out enough equity to add to my cash on hand to buy home 2 in cash. This would make home 1 pretty close to neutral as far as monthly cost vs rent.

3. Sell home 1 and buy home 2 for cash, using less cash on hand than option 2. This leaves me with 1 home renting at 950ish, but free and clear.

4. Walk away and saving.

There are so many numbers involved I'm kind of lost in the sauce. I am concerned that if I carry 2 mortgages and my wife or I become unable to work(We're fairly young, so I hope not!) that I'd end up in a tight spot. My thought process is leaning towards option 1. If I were to come into financial hardship, I could sell one of the homes and roll the proceeds into the other(Probably sell home 1 to pay off home 2).

Any advice is appreciated.