Potential Strategy Advise

[Gregory Mizzi]

TL;DR: I want to buy a fixer-upper with an FHA/VA loan for 0%-3.5% down, force appreciation through renovations, then sell after a year and use the profit as the 20% downpayment on a conventional loan then BRRRR. Is this a good idea?

Hello everyone,

I recently introduced myself the intro group and mentioned a strategy I was considering. Long story short, I live in NYC but plan to move. I want to BRRRR but I do not have 20% saved (not including my investment portfolio, which I do not want to blow on one investment). I did some practice analyses and determined that an FHA or VA loan would not work for a BRRRR. There is not enough money left to cash out. I was thinking of doing a "long-term" flip, whereby my first home would be a fixer-upper purchased with an FHA or VA loan (my wife is a veteran), live there for a year or so as I look for other properties. And instead of a refi, I would sell, hopefully realizing all the profits of the appreciation (minus closing and agents fees, etc.) instead of the refi's 70-80% LTV. The thought being that I can use the profit as the 20% down on another fixer-upper and BRRRR from there. I consider this over a typical flip since I have no experience and hard money loans are more risky. So far, I have not been able to think of any downsides that are within my control. I do not think I would be violating any loan terms, and provided there is not a significant decrease in home values, I think this could work. The only downside would be the mortgage payment vs. an interest-only loan, but I would be living there for at least a year so it makes little difference to me.

Does anyone see any potential issues with the initial strategy?

Thanks!