Hey @Shawn Callan
I sometimes cringe when i see some replies to threads so lets clear up a few things.
First, do NOT take a heloc out on your current home unless you are planning on living there for another year. Helocs, just like mortgages, have occupancy clauses that state you plan to live in the home for the next 12 months. Doing this and then moving out right away is called Occupancy Fraud, a type of mortgage fraud!
Next, if you do another VA mortgage, VA allows you to take your lease and offset your mortgage payment. You do not have to take 75% of your lease! That is a conventional and FHA guideline, VA allows 100% of your lease to offset up to all of your mortgage payment. You cannot use rental income above your mortgage payment to help qualify for a larger mortgage, but you can utilize 100% of the lease income to offset so that should help you qualify for more of a mortgage.
VA allows you to have 2 VA mortgages. Your first mortgage uses up your Entitlement or Tier 1 Entitlement. You now can use Bonus Entitlement, or Tier 2 Entitlement. This is based off of the conventional loan limit where you are buying. If you are buying in a standard loan limit area (most of the country), your current bonus entitlement is $766,550. Take your initial VA mortgage (lets say it is $410k) from $766,550 and you have $356,550 in bonus entitlement. If you are purchasing for $450k, you just have to put 25% of the difference down ($450,000 - $356,550 = $93,450 * .25 = $23,362 would be your down payment.
Conventional loan would take $22,500 so going VA is a no brainer! Cheaper rate, no PMI, better underwriting for rental income. Down side, your 2nd usage of a VA mortgage will run you 3.3% on the VA Funding fee (but it is financed into the loan), unless you get any disability from VA.
As others stated, selling could be beneficial if you are going into negative cashflow. But, VA is the only "owner occupied" loan type that you can actually refinance after you have converted this to an investment property! Depending on what your rate is, you may be able to lower your payment with a refi, even after you move out! Also, rent typically can be increased every year. If you think this property is in an area that will see decent appreciation, I would try to rent it out for 3 years and then consider selling.
Not giving tax advise, so check with your CPA, but I sold a rental after it was my primary for over 2 years and as long as it was considered my primary residence "2 of the last 5 years", I did not have to pay capital gains on my property sale up to the IRS limit.
