Life advice on what to do here? Uncertain couple.

[Aaron S.]

What would you do?

35m/28f couple. Household income $275k/yr

-TSP #1: $205,000.   

-TSP #2: $76,000

-Brokerage and Savings: $40,000

-long-term rental property, VA loan, cash flows $200/mo. est. $100k in equity. Built in 1997, generally low-maintenance.

-mid-term rental property (rented room by room via furnished finder), VA loan, cash flows $500/mo. Unknown amount of equity due to unknown house value.* Newly built in 2022. An absolute headache to deal with due to corners cut by the builder (we are outside of the build warranty). Every few days there are new issues and we are constantly having contractors and technicians at the house dealing with one problem or another, while coordinating with our tenants who are on a range of work/sleep schedules.

-condo that we live in as primary residence, VA loan, est. $40k in equity. Built in 1985, generally low-maintenance.

*a near identical house (same blueprint) was built next door and has not sold for 8 months. The price seemed reasonable but apparently it is too high. This makes us uncertain as to our own realistic house value.

Situation:

We are interested in purchasing a new house for us to live in, and rent out our condo as a long-term rental.

The house we are interested in is a Meritage new construction. $515,000. It has a very nice bath tub that is of high importance to us personally. We heard offhand that only 20% of homes in our market have bath tubs. The area is also good, safe, and with nice mountain views. 

We have 3 active VA loans. To use our remaining VA entitlement and put down as little as possible (without paying PMI), and quoted 5.375% interest by Meritage's preferred lender, our estimated cash to close is $72,000. 

We are considering taking out the required cash to make up that total from our savings, brokerage, and 2x TSP loans from our individual accounts. These loans would be repaid back to our TSP accounts at 4.475% interest.

Complications:

-The condo would not cash flow if rented out. A property manager analyzed comps and it appears that the condo would lose ~$150/mo, before repairs. 

-We are dealing with a mysterious leak at the midterm rental that is tying up a lot of our time, energy, and money. We are using up all of the $500 deductible from home insurance to cover water damage restoration. We are still trying to identify the actual leak source, and figure out how much it will cost to repair it. And also what to do with our tenants that will not have a shower for who knows how long during repairs (any recommendations for how to manage this?)

-The midterm rental also has a new, main line leak that we are getting looked at tomorrow with leak detection. We do not know if this is related to the other leak, or some other issue.

-The TSP loans give us pause due to conventional wisdom saying, "you should not take money out of your TSP." I have done this once before to purchase our condo with no issues and we both make more than enough money to pay both the new mortgage and pay ourselves back (85K + 3600 after tax monthly retirement for my partner, and 140K for me).

-With all of the above stuff going on, maybe taking out TSP loans, spending almost all of our liquid cash and moving into a new house is not a great idea to do right now.

FAQs:

Q: Why not get a property manager for the midterm, if running it is such a headache? 

A: Because it is rented by the room, we cannot find a property manager who will run it for us. Especially not with 4 separate leases. Even a 10% PM fee would bring the cash flow down to zero.

Q: Why not rent the midterm as a traditional rental, with a property manager?

A: There is a lot of furniture in that house that we would have to figure out what to do with, if it were rented as a SFH with no furniture. Do-able for sure, but a lot of work. With a 10% PM fee, there is a possibility of some small cash flow, or maybe break-even.

Q: Why do you need to do anything? Why not just stay where you are?

A: While our condo is fine, we would prefer more space and a nice bath tub. It sounds silly but in our market this is difficult to find. 

So...

What would you do?