First home, plan to turn into rental in 2-5 years

[Jacob R.]

Good Evening BP,

First, I would like to lay out the scenario, and then list the questions below. Not sure if it matters but I'm a single male in Dallas, TX with a steady salary. I am planning on getting into REI, but first, would like to purchase a single family property for myself. I intend to live in the home for the foreseeable future (3-5 years). Ideally the property needs some TLC, and I will rehab it while I live in it with the plan of renting it out after 3-5 years.

Here are my questions:

• Does this sound like a decent plan?
• Do I run analyze the property in the same way as if I were renting it out right away?
• I have access to a VA loan, what are the pros/cons of putting no money down vs a down payment?

I realize these are pretty basic questions, but I want to make sure I’m thinking about the process in the correct way. Honest feedback is greatly appreciated!!

v/r

Jake

[Steve K.]

Welcome to BP, @Jacob R.

When an REI buys a rental, it's typically 20 to 25% down payment. If you are the owner-occupant, you have the advantage of the 0% down VA (or others, the 3.5 to 5% FHA down payment). An advantage to you.

Why not make your first home your first rental, and why wait 3-5 years? Other young singles or couples are on BP talking about "house hacking" a duplex/triplex/quad (wherein you qualify for the whole home, but tenants in the other 1,2 or 3 units pay the entire mortgage/expenses)....therein accelerating your REI capital available. Rental #2 could come after living in the 1st home 1 year.

Have you read about the BRRRR strategy?....another method of parlaying your small investment into faster growth.

To buy a rental with 100% financing, the net cash flow per month will suffer from the larger mortgage payment. But, look at 100%, 80% and 0% leverage....look which one builds your wealth faster. See if it works for you.