Joined: 09 Jul 2014
Location: Orange County
Active duty military buy a house while in the service?
I'm 34 years old and AD Military. I have less than 9 years until I separate from the service. I have 2 years left at my current duty station in Southern California. Right now I have a good housing deal and am renting very cheaply in a great location on the Navy Base. Living here is also allowing us to save a lot of cash towards a future home purchase.
But I badly want to purchase a townhome/condo in the area for various reasons. Was born and raised Southern California and love it here. I'm worried about leaving the service in my 40's not owning a home, now looking at much higher home prices and looking back feeling like I had squandered 20 years of military service pay without a home to live in.
Currently if i buy a town home/condo here and rent it out after transferring to my next duty station, I will come up about 300 dollars short after property taxes, insurance, mortgage, and HOA. We would manage this but, if I have trouble renting it out for more than a few months I could be in serious trouble. The local area has some of the highest real estate prices in the country. 2 bedroom units without a garage are around 315-350K.
Finally my question: Should I continue to save away and find a low cost area of the country and buy a modest home with a big down payment or take the risk and buy a place here and now?
I understand no one has a crystal ball and knows what the future of home prices and interest rates are. But I would love to hear from what others think as I know how easy it is to lose the big picture and have tunnel vision on emotional matters like this.
Any advice or comments would be greatly appreciated.
Thu Jul 10, 2014 12:33 am
Wino Senior Member
Cash: $ 113.80
Joined: 03 Aug 2012
If you instead save that $300 for 9 years, you would probably have between $44K and $60K as a down payment. That's enough down payment for a $220K to $300K house, and thereby avoiding PMI. Plus, you have access to that money in the interim in case of emergencies.
Assuming that you have one month per year in vacancy, and 1% per year in maintenance, your $300 per month is going to turn into about $500 per month, which you'll have to cover. This puts you firmly into the $80K level of savings, instead.
In addition, you won't have the headache of renting from afar, and all of the other problems of being an absentee landlord. Think about returning to the house to find all of the bathroom and kitchen fixtures missing, as well as holes in the drywall. Even worse, find out there was a meth lab, and now the place has to be torn down as an environmental hazard. That won't be covered under insurance, as it is a criminal activity.
From the above, I'm sure you can deduce my suggestion: Don't do it, and save the money instead. If you can up the amount to $1K per month into the "house fund," you'll probably have anywhere between $150K and $200K for a down payment when you get out.
Don't buy problems.
Thu Jul 10, 2014 2:17 am
oldguy Senior Member
Cash: $ 717.80
Joined: 21 May 2006
quote: and looking back feeling like I had squandered 20 years of military service pay without a home to live in.
A big part of that "squander" is usually cars. With no mortgage payments, servicemen often blow the money on cars. Go thru the parking lot on Post, you'll see Big Dualy 4WD 4 doors, diesel - about $55,000. Add the wheels/tires and it gets close to $60,000. And in 5 years it will be worth $20,000. You'll see rows of similar priced vehicles.
But in general, money grows faster than houses - eg, if you invest $2000/m at 10%/yr for 9 yrs you'll be close to $350,000. And then you can make the DP on whatever new house you like, whereever you might want it. IMO you'll like the fresh new house way better than having to refurb a 10-yr-old house that 3 or 4 renting families have lived in. (Your tastes change, trends change - by then granite counters may be 'dated' and amenities will be things not yet invented today.)
Thu Jul 10, 2014 10:30 pm
Cash: $ 381.25
Joined: 09 Feb 2009
IMO, you kinda do have a crystal ball right in front of you and it's telling you some facts in your life.
1. You have two years left at your duty station, which means after that time period you could be moving.
2. You have 9 years left until your out of the service.
Most people don't have that type of direction and job security. I was in the Marines for 5 years back in the 90's and I also own rental property and I can tell you this, you don't need to be owning real estate, whether it's for rentals or your primary residence because you know in 2 years you could be moved somewhere else and I don't think it's wise to own property with your current job situation.
You are in a very fortunate situation that most of us could dream of being in. You have cheap housing, your job is stable and you know your future. I would continue to stock away money for the next 3-5 years and then if you think your job location is stable it may be time to buy property, until then I don't see the wisdom. I mean just think of the DP you'll have.
Risk comes from not knowing what you're doing. (Warren Buffet)
There is plenty of time to purchase a townhome or condo, and given these appreciate less than single family homes, it is not as good of an investment over the term you have in mind.
Sorry, but unless you get a great deal, real estate in my opinion is a wait and see proposition for the economy is a house of cards, and all it takes is one card to fall and the whole economy collapses. Unemployment is still higher than it should be, and the uncertainty is going to continue as this recession is far from over. These factors will keep homes in stagnation for a few more years, so wait it out is my suggestion, you have plenty of time to watch market.
Good luck, and thanks for your service.
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Wed Jul 23, 2014 10:38 pm
clements2000 New Poster
Cash: $ 0.45
Joined: 09 Jul 2014
Location: Orange County
Big thanks to everyone for the great responses.
I will be taking all of your advice and continuing to rent.