Concerns: Home Ownership in the Military

Buying a house can be one of the most exciting times in a couple’s lifetime. Oftentimes, they will expect to put down roots and raise a family or build equity in the home for future return. However, military couples might be hesitant to make the purchase due to uncertainty. Perhaps one’s uncertainty has to do with whether or not the member will be discharged for whatever reason. Can they afford the house? Do they have enough savings to support themselves while another job is sought? Even still, they may worry that if they stay in the service, they will move across the country or even OCONUS. Will they have to sell, rent or worse yet take a loss on their investment?

I’m writing about this today because I’m a homeowner. A few years back, my husband and I decided to go for it. At that time, it all seemed right. Fast forward to present day, I’m freaking out. Nothing is wrong per se,and we don’t have orders anywhere else right now, but I’m looking ahead to the future. What if we do transfer out of the area? I’m not questioning whether or not I can handle doing the GEO thing. I imagine that I could. After all, it’s really no different than when he’s underway. I just worry about how the kids would handle that. My biggest concern though is taking a loss on the house. Quite frankly, the market sucks right now. I see my friends PCSing and trying to sell and they have shared with me their fears of not at least breaking even. I definitely don’t want to be in those shoes.

Don’t get me wrong. I’m not trying to scare anyone out of buying a home while still on active duty. If you think it will work for you and your family—then do it. I will say that we have loved it thus far. Still, I urge you to consider everything. Be sure that you are willing to deal with all the cons. Discuss the possibility of being a GEO family, talk about the cons of selling and/or renting. Don’t go into home buying blindly.

Thanks for reading my random house concerns for the day. J

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8 Responses

  1. Very good points. We too bought our first home a few years ago. IT is an awesome investment opportunity when done at the right time at the right location. Home sales are up this month for the first time in a while. A lot of big “military areas” are not feeling the hit as badly as “civilian” cities b/c of the constant supply and demand. My opinion is that it is hard to buy a home just to live in, no matter how long you will be at a duty station. But if you buy to “fix up”, there is still money to be made. You just have to know what you are doing and be careful! You also have the option of renting out your house and continuing to the next duty station. So many people want to rent instead of own b/c of the market. Also with the market down right now, it is a good time to buy for many knowing that they will be in an area for a while. They are getting a really good price on a house they may not have been able to afford before the market dropped. I know people that there houses have been on the market for 6 months (which still isn’t that bad if they sell soon) and I know of a few that have sold their houses in less than a week. It really just depends. IT is a really good thing to think about though. Also, I encourage everyone to go into their local Navy Marine Corps Relief society before buying or moving off base to rent to see what they can afford. Banks always approve you for more than you should spend. ***Remember that taxes can go up every year and you have to be able to afford your new house paymet when it does! And don’t forget that your BAH should include your electric, water, taxes, and insurance, on top of your mortgage amount!!!

  2. We bought our first home in 2000 in a recession proof major city. Here’s what I learned: 1. We had it for only 2 years before getting new orders to move again. Not good. I now see that we needed to keep it for at least 5 years. 2. We had to sell. I hoped to have rented. But, the State we were in only allowed a rental agent to initiate the rentor/rentee contract. Property management was not available. Since we were going overseas, I was warned by a Realtor that should a renter decide to withhold rent, the renter (me) we have to appear physically in court to start papers against them to get rent, etc. We were not near a US military installation. 3. We decided to sell and the Realtor was optimistic that we could get 15% over the original price. The market was going up and the sales for existing home in the area had been up by 20% over the past 3 years. 4. Then, while we were packing up to move out, a major electronics manufacturer went bankrupt and 1,000 people were suddenly out of work. Our neighborhood went from 4 homes for sale to 15 homes for sale within 3 months. 5. We finally sold our house 1 year later for what we paid for it. We had to cover the costs of the sale and all fess with our savings. We were then broke, but broke even. We were starting over.—Many of my friends have great success stories. Some even own 2 or more houses that they rent out successfully. I have not been so lucky. I recommend only renting until you know that you are going to retire or leave the service, then buy.

  3. Great points!

    We were approved very high. It was ludicrous. Thankfully we were smart enough to know what we could afford.

    It’s certainly a Buyer’s Market right now!

  4. MArk made a good point with how long you will own a home. Again, it depends on the market. I have a number of friends that move every 2-3 years and still chose to buy. They have made a lot of money doing it. If I would have sold our house only one year after we bought it, we would have made tens of thousands of dollars more than if we sold it now. The market is a roller coaster! My husband and I will always purchase as long as we can live in it 3 years. Or we look at the cost of renting and as long as we can “recover” or break even with our closing cost and taxes, we don’t care if we make money. We would rather own. It’s also great for your credit as a young couple.

    My vote is to buy! Do your homework and you’ll do fine! 🙂

    And Jenn, Isn’t it awful that banks approve you for so much more than you should spend!? I know a girl that works at a local mortgage branch and she said it’s simple, we can just take their house if they don’y/can’t make payments! That’s awful. But, I guess it is the buyer that should know better!

  5. Oh, the banks are horrible. It’s a major disservice, especially for the eager and uneducated first time home-buyer. We have friends who are “house poor” because of this very thing.

    I think Mark makes great points as well. In fact, we always asserted we wouldn’t buy until DH retired, but two things happened (1) we seemed to be homesteading and (2) he contemplated getting out (which I convinced him against given how many years he had in).

    Chances are, we may stay here or close to here. However, I still have concerns. We may keep it as an investment property, but I don’t anticipate retiring here even when that officially happens.

  6. We’ve been wrestling with this, too. We have a year left on these orders but might be doing a retour for another three. I am so tired of renting but there are houses here for sale all over the place–and they’ve been on the market for months. So if we did have to sell in a year, I’m not sure it’d be worth it, or if we would even be able to get rid of the house. The one thing about renting that DH has told me is that he likes knowing that if something breaks or whatever while he’s deployed, he knows that all I have to do is call our management office and it gets fixed. It doesn’t cost anything and he knows I don’t have to deal with it by myself.

  7. Ann,

    Also- great points. I love all the comments and how we have different outlooks on it. These are great opinions for a first time buyer!!

  8. The current housing market is a buyers dream, except for one small detail; credit is getting tight, and it is going to get tighter. Right now most market analysts agree that you will get more bang for your buck by renting and investing the difference. Insurance is cheaper because you are only insuring goods. You have no liabilty if someone gets hurt on the property. Home repairs are the landlord’s problem. Rent is cheap now because people are not moving because they are trying to ride it out.

    While home prices are low, and getting lower, it will be some time before the market recovers enough to make the “lost” money in a housing transaction break even. Lost money is points, realators fees, title search and insurance, and PMI. This is a cost that has to be overcome by increasing value in order to break even. Other costs are moving expenses, utility deposits, connection fees, property taxes and home-owners vice renters insurance. Add all of that together and the initial hurdle to break even is high. Then, when you sell the place, you have to pay it all again to move to the new place. In a declining market this can be quite a mouthful to swallow.

    That is not to say you should not buy a house. What I am saying is that you have to do a parallel calculation of risk to reward. Some markets, like Raleigh, NC, are actually seeing an increase in value because the local economy is expanding. This brings up the difference between paying to live and buying to invest. You can always buy an investment property and generate a steady income from it. In NC, the home owner can act as their own General Contractor without a contractor’s license, thereby making it possible to buy a distressed property and live in it while you refit it. This will result in a profit on a one-year flip, or you get a nice retirement home on the cheap, and rent it out in the meantime. There are companies that will do the property management for you for a fee, so you don’t have the absentee landlord worries.

    By and large, however, you are better off renting at this time. Interview your landlord. Ask to speak to current renters about the timeliness and quality of the work they have seen. Look the place over for things like water damage, lawn condition, trash, etc. . Check on local crime statistics. The money you save by renting will keep you from being house poor when things start looking up. Remember, you don’t have to have a financial disaster to lose your house. Your bank can tank and wipe you out. If you are not a member of Navy Federal, or USAA, rectify that immediately. Their exposure to the current crisis is minimal, and they will be the last man standing when the dust clears.

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