My Potential First Deal-SFR House Hack with VA Loan

[Kevin Phu]

So I found out about BP about a year ago when I ran into my friend @Ben Biggs who I hadn't seen since Navy boot camp in 2010! Since then I've been learning as much as I could (still learning!) about REI and worked on getting my life settled as I was transitioning back into the civilian world, into a new city, and a new job.

I started my new job on October 1, 2016 and I set a goal to get my finances in order and get into a deal in a year or less. It is now 9 months later and I am potentially going into a contract on my first property! If I end up closing on this property, I will be renting out the bedrooms to reduce my current living expenses drastically and build MY net worth instead building someone else's by paying rent.

Property Info

-SFR 3 BR/2BA with detached 2 car garage and large yard

-1,309 sqft (6,100 sqft lot)

-Purchase Price: 400K with $0 @ ~3.5%

Improvements Planned (~$2500 is my estimate)

-Fresh paint on all interior walls (plan on doing this myself)

-Fresh paint on the inside of kitchen cabinets

-New flooring in the two rental bedrooms (undecided on what type and who will do work)

-Have tile and grout cleaned throughout house

-Minor work like securing slightly loose trim pieces

-Backyard clean up

Monthly Expense

PITI: ~$2,217

Utilities: ~$125

Vacancy: $100 (5%)

Repair/CapEx: $100 (5%) (big ticket items are fairly new and in great condition)

Total: $2,542

Estimated Monthly Income

Each Bedroom: $700 ($1400 total)

One garage parking spot: $25 (not including into final calculation as it is not a definite)

Total: $1400

Out of pocket: $1,152

I was paying $1,435 in rent so this would equate to reducing my monthly expenses by ~$300 ($3,600 yearly).

Exit Strategy

-Live in property for at least 2 years.

-Purchase another property using FHA loan and house hack again.

-Rent out first property as entire unit (no individual room rentals). Similar properties in the neighborhood are renting for around $2,300 at the moment. So considering rental increases and elimination of utility bill, property should break even or slightly cash flow. 

Conclusion

I fully acknowledge that a break even or slight cash flow scenario isn't the best or ideal. However, I am reducing my monthly expenses from it's current amount, building my equity, and getting my foot through the door into the REI world. I am not in a position yet (or comfortable) with purchasing a MFR for better cash flow because of the higher mortgage and management that would be needed (I want to avoid paying for a PM as much as possible at this stage). If worst case scenario the two bedrooms went vacant for a little, with my current W-2 income I am very comfortable with covering the full mortgage so there is little risk in that regard.

What is the BP community's honest opinion on my situation and what advice do you have for me going forward?