NOVEMBER 25, 2014 – There are a lot of factors that go into deciding to purchase a home for anyone. The factors affecting this decision is even more complicated for military buyers. Here are some of the considerations that military families should talk over as they are deciding whether buying makes more sense than renting.
Point-It isn’t an investment
Unless you are a whiz at market timing and know exactly when the buy low point is and can be sure that when you have to sell in a few years is going to be a sell-high(er) point, it is best not to consider military house purchase as an investment.
Limited time-line purchases of real property, with the expectation of flipping them is speculation, and even seasoned professionals get burned on this strategy now and then. The advantage professionals have is that they are doing it all the time, so the losses can be averaged out.
Counterpoint-Your IRA is an investment
Most of the payments you are making on a house the first few years are paying off interest. What if you put that money in a place where it is making money for you instead of making money for the bank?
When you look at this option, consider the total lifetime of the investment of those dollars. If your investment is being compounded over a period of twenty-to-thirty years, the amount of money you will accrue will far outstrip the money you might make on a house after you pay yourself back for the down-payment.
Houses, even new ones, require maintenance. Are you sure you want to be spending your off-duty time working on a house. You can hire contractors, but that’s just going to be money that is effectively added to the cost of the house, that you may or may not ever see again.
When you couple this scenario with the fact that your time availability is not really something you can predict because of the nature of your agreement with Uncle Sam, these responsibilities can spiral out of control and introduce additional stresses for everyone in the family.
Counterpoint-Where does the family fit in?
Families get precious little of your time as it is. In most cases, given the choice, families would rather have more time together as a family than time in a structure that demands more than family members really want to be giving. Finding this out after you’ve committed to a debt that is going to last longer than your time of service is not the rational approach.
There is one family consideration that may tip the scales toward purchasing. If you cannot find a place to rent that is in the school district where you feel your children need to be, you may want to consider buying, but there are usually ways around this, so look at all your options first.
A series of trade-offs
These aren’t all the issues that deserve discussion with your spouse when you are getting re-assigned to a new base, but these issues do expose some of the larger considerations. There will always be trade-offs in every situation, so don’t assume that what has worked in the past will be exactly what you need to do next time.
It is important to remember that any assignment is temporary. Purchasing real property in an area you have no desire to live in over the long term is a risk. Sure, you may be able to rent the property, but becoming a landlord is probably not one of the roles you want to learn. Be clear about your objectives. This is not a decision to take lightly. It’s one of those decision that should be unanimous. Every time.