VA loan in expensive area: how would you use it?

[Julia W.]

I'm a total REI noob so bear with me. My husband and I are looking to make our first investment purchase using the VA loan (0% down up to $575k for our area, a bit more for multi-family). We must live in whatever we buy for at least the next two years and are looking to purchase in the next 3-6 months. We will be long distance landlords in a couple years when we move, and are looking at this house as an equity egg to cash in when we decide to sell 15+ years down the road.

$575k sounds like a lot but for the Monterey (CA coastal town) and desirable Pacific Grove area it's a drop in the bucket. We can get a cheaper deal by going to a neighboring zip code with poorer schools and higher crime (whose houses are on the upswing but have yet to bounce back from the crash), but I'm concerned about being able to find quality renters. Additionally, we will not be in a position to put a lot of sweat equity into the house beyond weekend projects over a span of two years.

If you were in our situation with access to this kind of financing, how would you approach this? 

[RJ Mitchell]

Hey Julia,

I'm a Monterey native (born and raised in PG). I'm far from an expert but I wanted to through in my own 2 cents

1. Feel free to reach out to a couple property management firms before you decide to buy. They should have some quality advice, plus you'll probably want to use one in the future as you said that you'll be a long distance owner. 

2. PG may not be your best city to hold a rental property. Remember, this is a home that someone will rent - not that YOU will live in. With that said, I have a belief (it's not fact - check with the property management firm) that Monterey is a better area to rent out your property. There is probably more demand with the military crowd (which you are familiar with), students (MPC & CSUMB), families, and it's more affordable but yet a better area then Seaside/Marina.

3. In terms of the entire Monterey Peninsula, it's probably not the best place to buy and rent out (i.e. you are probably not going to have the greatest return in the area). I personally would like to do the same as you simply because I know the area VERY WELL (having grown up). 

Best of luck!