Using a 0% down (VA Loan) to purchase ~950k property..

[Matthew Hanson]

Hi all! This is my first post here on BiggerPockets.

I've been thinking about a few things, and had some pretty deep conversations with a friend who is fairly wealthy, and is building up his portfolio.

Here's my circumstance. I'm 27, and have a decent bit in the bank. I also own a property financed through a VA loan, I put nothing down on that property. I currently owe about 255k on it, and it's worth should be right around 295-300k. It's been refurbished and is in immaculate modern condition.
Current outgoing on that property monthly after all bills are 1650. Incoming is 2125 monthly. with an excellent renter.

The VA loan can only be pulled one at a time. So in order to pull a new VA loan, I have to sell my other property.

The couple of people I've talked to have put these ideas in my head.

The less real cash you have invested in a property, the more money you earn when the property value rises.

I can get up to 987,000 in a loan, 0% down, through the VA. If I were to pull a loan for near the max amount, and rent out rooms for the bulk of the outgoing, I can live fairly cheaply in San Francisco, while building a much much larger amount of wealth by owning a more expensive property.

The properties that are out there for this amount, I could cover roughly 60-80% of my costs just by renting out the rooms. Even if values drop, I would still be able to live there at a decent rate, and wait it out. I'm looking long term, no trying to flip properties.

Now, the questions are as follows.

How can I find out whether rental rates and property values are tied together? Judging from the knowledge I have, it seems that even if property values dropped in SF, rental rates will stay the same, due to lack of space.

Does this seems like sound advice? Leveraging high amounts of debt to build equity? My friends have done this, and have been able to build enough equity to purchase second and third properties by buying in metro-areas, in high valued neighborhoods with high rental rates.

Not many people have the ability to buy a near 1m property, without having to raise over 200k in a downpayment. I have a luxury not many people have due to the VA loan.

Cheers,
Matt