New Rules, New Plans

[Kurtis S.]

Long ish post of my thoughts with the new rules we're playing by. Looking for some outside insight to poke holes in the idea...

With the new methods of Freddie/Fannie around cutting back on secondary and investment loans I'm guessing the cost for those loans are going to increase. This has spurred incorporating the following idea more frequently:

Each year, purchase a new primary residence SFH leveraging the low down payment of owner occupied conventional loans 5% + PMI, lower interest rates, and cheaper fees since Fannie/Freddie will have no issue buying on the secondary market.

Taking this the next step further, there's been some new construction going on around me that are similar prices as homes that are 30-40+ years old due to the hot market. So buying the new construction to get the latest tech/efficiencies available. 

This should minimize the Repairs (since everything is new), Vacancy due to the SFH being newer and a nicer option than other homes in the area at a similar rental price point, potentially not need PM since there "shouldn't" be many issues. CapEx should be the same since things break at generally the same rate and should be accounted for.

The thought is if the LTR/STR comps could cover the PITI+CapEx and still cashflow a little with having so little locked in with good rates for 30 years, the rental rates will still rise each year that will catch up around the time repairs are needed. Since this is a new build, there shouldn't be a problem with a long term hold even if the market dips like we expect it to once interest rates rise so long as the rental rate covers the holding expenses.

Repeat this method each year after living in the home for the required time to avoid mortgage fraud. Long hold everything and let appreciating rents/home values out pace the increased taxes/insurance premiums each year. Once you hit the 10 loans max, find a portfolio lender to refinance with and put everything into a single loan they hopefully keep in house and potentially not report so you can keep going to get 9-10 more. When you have enough equity, cash out and pay off enough investments to live on the cashflow of the free and clear investments after proper PM+soft costs or dump it into a reputable syndication that will pay out what's needed +20% buffer to be truly passive.

Of course we'll still plan to have 6-12 months of reserves in place for each rental PITI that should/could cover anything that comes up and ensure the new residences LTR/STR rates should cover the holding expenses once we can move out.

What am I not thinking of that may bite me? or what are your thoughts of this idea?