First Home Rental Evaluation - Planning Ahead

[Tyler Jorgensen]

Military family here,

I'm expecting a move in about two years and I want to prepare my home for my first rental. I've ran some calculations through bigger pockets, renttoretirement, and calculator.net. I'm super new and have been reading and researching for the last year in preparation to walk the road to financial independence. 

What I've put together is this:

Home: 205k purchase at 2.7% / probably a B- class neighborhood / 3 bed 2.5 bath with loft / 2300 sq ft / 2006 build

Rental estimates: Sites average 1650 but we have upgraded to hardwood/tile and granite countertops so I think I could pull 1800 but I'll stick with 1650 for a safer estimate

Numbers: 

This is a suburb of Las Cruces, NM. 

My analysis paralysis comes from if I should sell it for a better opportunity or keep it because it's a solid rental to hold on to. I'm just so new I'm unconfident on any choices I'd make. I will also have to figure out how to get a VA loan on the next house while trying to have a rental because I don't have any cash for a down payment.

My question is if this house can shake out to be a solid keep or if it would be recommended to sell and find a better location to invest like the midwest.

[David M.]

@Tyler Jorgensen

Have you confirmed that you've used up your VA entitlement?

You might consider before you pcs to refi into something else, such as a conventional while you are there.  You said you've had it for 2 years and will pcs in 2 more?  So, in about 3 years of holding you should have about 6% equity assuming home values hold.  You could try refi'ing into a conventional (which goes as high as 95% ltv as long as owner-occupied).  That would free up your va entitlement.  Yes, you'd lose the 2.7% rate you have now, but at first look that is the price you pay to get your entitlement back and just the cost of money to doing this investment.

The conventional is most preferred, vs any of the other gov't backed loans, since the PMI will come off. None of the other loans will do that (well, va loans its all baked in really...).

(sorry haven't looked at your esti)

In the next two years, make sure you figure out how to remotely manage the property.  I know many installations have groups that will seem to take care of that for each other.  So, as green suitors (or whatever service) pcs the incoming help manage the properties of the outcoming..  pretty standard "pay it forward, pay it back" methodology.  

But, ultmately how to proceed in two year might be a decision to be made then.  Lots of factors involved...

I'd happy to chat if you'd like.  Just let me know.  Good luck.