Is it OK to lose money for a little while?

[Cody Davis]

This is a long one. Bear with me.

I have been pre-approved for a VA loan which means I don't have to put any money down. What's the catch? I already own a home that I refinanced through the Interest Rate Reduction Refinance Loan (IRRRL) which counts toward the total usage of my VA entitlements. If I keep my current house and rent it out I will have to adhere to more stringent rules.

     1. New property must be no LESS than $144,001

     2. New property cannot be more than 4 units (Multifamily)

     3. The loan limits are established following a weird formula

     4. I must live in one of the units for at least 12 months

Between the results of the VA math and the trust of my Banks underwriters my purchase must be 1-4 units between $144,001 and $330,000.

I have an opportunity to buy a recently updated 2,148 sq ft duplex for $199,900 (around $800/mo mortgage per Zillow). The %1 Rule says I need to charge $1k per side of the Duplex. The area will likely only support $850-$900 for (1,074 sq ft). There is also a detached double garage I could rent for $25. By the %1 logic I'm going to be losing money even if I were to rent out both sides.

All that said, my current home (refinanced for 142,900) will rent for $1400-$1500. That's right in line with the %1 rule and my mortgage is $978 including tax and insurance. So, my house is going to earn a little and the Duplex will lose a little.

Is it financial suicide move forward with these numbers if I plan to move on after the VA's time requirements are met?

I'm pulling my hair out.

[Ned J.]

Only advice is don't live and die by the 1% rule..... its a quick and easy tool, but there is a TON more to look at than that mantra alone......