Buying First Property and Getting Capital Out

[Travis Henry]

Hi BP Community!

I live in Honolulu, so getting my feet wet in my market is going to be a little tougher and my mistakes would cost more. I've read several other members' posts about living in hot markets, like San Francisco, and trying to invest out of state. I have a realtor and lender in Tennessee and am looking to purchase my first investment property there before the end of the year.

I'm looking at purchasing a SFH or multi-family property for around $150,000 and planning to put about $50,000 down (~33%); of course, the DP requirement will change depending on whether I move on a SFH or a multi-family. I know, I know, I could put down less and use the rest for rehab or toward my next purchase, but my lender is telling me my DTI ratio is such that a $50,000 down payment is needed to get me to ~$150,000 purchase price. I've heard this from a couple of lenders in the area, as well. Maybe this is a Tennessee thing? Or just an investment property thing? Where my BP Tennesseeans at?!

At this point, I'm trying to determine a realistic time frame for getting my capital out of this first property. This is a basic layout of what's happening in my head, but I'm wondering if I'm oversimplifying things:

At Year 0:

Value - $150,000

Debt - $100,000

Equity - $50,000

At Year 1:

Value - $156,000 (assuming 4% appreciation)

Debt - $98,653 (30 yr. @ 5.50%)

Equity - $57,347

At Year 2:

Value - $162,240 (again assuming 4% appreciation)

Debt - $97,230

Equity - $65,010

My question is, is it possible at the end of year 2 to expect to be able to cash-out refi at ~80% of the equity ($52,008) I have in the property and recoup my original investment? Are there any other considerations that I'm missing? As I mentioned, this will be my first property, so any insight is much appreciated!

Thanks,

Travis