BRRRR or Downpayment? Help

[Pierre Boisrond]

In March of 2016, I used my VA Loan to close on a 3bd/3ba townhouse in Tallahassee, FL for $59,247 at 3% interest. I only put $1000 down as an earnest deposit and paid $800 for 2 separate inspections. I did not have to do any repairs. I deployed in April and decided to rent the property out until my return. My mortgage is $567.62/month. I want to purchase a second property in 2017. I have about 12k in cash. I would like to pay off my house early. However, I also want more passive income while Im in school. I plan on living in the 1st home and renting out each of the other 2 rooms for $300/month. Should I attempt the BRRRR strategy or should I just use the cash available to put a down payment on the 2nd property?

[Travis Hughes]

Agreed.  Without knowing all of the other numbers for the townhouse, @Kevin Siedlecki is pointing you in the right direction. With today's historically low interest rates - and especially the rock bottom rate that you were able to secure with VA financing - you have to look at the mortgage itself as part of the asset. If you sell the townhouse, you loose the 3% financing.

That having been said, if you only put about 1.7% down payment and secured a 3% VA loan at 98.3% LTV, even factoring some appreciation since closing, you still may not cashflow because you are so highly leveraged.

What will the townhouse rent for? What is your all in PITI? (Plus PMI if a VA loan is required to carry it?) What will property management cost you? Capex? Routine maintenance?