Sell my house or refi and rent

[Tony Iaconelli]

So I’m unsure of what I should do moving forward and am looking for some advice. I apologize in advance for the long post.

Currently in the process of purchasing a small multi family (2-4) units using a VA loan. I own a home currently that my wife and I purchased 2 years ago for $172,000 using a VA loan. Due to the VAs loan entitlement limits I can purchase up to $312,000 without a down payment.

My home has gone up in value quite a bit in the last 2 years and I believe (will obviously get an appraisal to know for sure) it is worth $205,000. The VA allows me to do 100% cash out refi. I can rent my home for roughly $1700 per month. Right now my home meets the 1% rule, but after refinancing it my payments would obviously increase as well as my current interest rate.

Option #1

Purchase a small multi to house hack and rent remaining units and sell my current house and save the profits. Live in for a year per the VA's requirements and repeat.

Option #2

Purchase a small multi to house hack and rent remaining units and do a cash out refi on my current home and save the money for future down payments and rent my home even though it will be below the 1% rule. Repeat the process after one year.

This will be my first deal so I am nervous. Option two sounds great because I can potentially pull 20-40k equity out of my home depending on what it gets appraised at but then the numbers won’t make sense when rent it. Any advice would be much appreciated!

[Justin Larese]

I've been in your situation and know the anxiety it brings. I had my first home and used its equity to buy my 2nd home and rented the first one out to help cover both mortgages. The time between the transition and finding renters was knuckle gripping to say the least. Remember the 4 pillars of real estate. As long as you are making money on your first, or breaking even you are still making equity on the first. I would advice trying option 2 first. If it doesn't work out you can always default back to option 1 and sell. If you can make option 1 work, in the long run you will be in a better position