Buying a house

[Magellan]

I would rather have the equity

Never a good reason to buy a house you won't be living in 250+ days a year considering you will be moving in 3-4 years anyway. Any equity you would build probably won't even cover your closing costs or other expenses associated with home ownership. So financially you won't get ahead vs renting unless you are up to the challenge of being a land lord long term.

I'm really tired of living out of a suitcase (I've been doing it for awhile now and I would like to just come home and chill when I get the opportunity... with my own shit!).

Valid, but weigh the costs. An apartment, condo, town home, duplex, etc. could offer you 90% of that same comfort level with a shit ton less hassles vs owning your own house.

I just really hope I get awesome neighbors....

Hope isn't a strategy.

This is all coming from someone that bought a house 7 months ago myself. Do I regret my decision? No, because I love my house and I have learned a lot by going through the home buying/ownership process, which isn't terribly pleasant right now. But if I had to do it again knowing what I know now I would be happily renting with more cash still in the bank.

[LT4Life]

Equity? Don't use equity as a decision when buying a house these days. That is old school thought. You won't build enough equity in 5 years to cover closing costs and all the other stuff that goes into it. If you want to put a price on the feeling of not having to worry about taking a 6 figure loss at PCS time or finding renters that won't destroy your place, then chock that up as well. If you had a family this might be a different story but for a single guy in this economy, it doesn't make any kind of sense (financial or common).

Buying a house for the equity and tax advantages just doesn't exist anymore. Take the money you would save and double down in Vegas. I'd say the odds of turning a profit are about the same.

[ViperStud]

Dude the decision you need to be making is not whether you want to "build equity" vs "not feel like the place is really mine." You simply need to decide whether you plan on owning something short-term (sell when I PCS) or long-term (I want to own it outright 15 or 30 years from now, so I'll be a landlord when I PCS). 96.9% chance that when you move at the end of a 3-4 year PCS, you will not have enough equity to come out ahead when you consider paying the 5-6% to brokers and the closing costs of the buyer, which is very common. Even if you do net some cash, it will almost surely be less than the money you'd have saved by paying less to rent. I own a house from my last base and I am LUCKY to make as much in rent as I pay the mortgage company; a lot dudes I know are not that lucky.

The American dream of 2.5 kids, a dog and a white picket fence is a farce for us AD guys while we are in. As a single dude, you're not likely to meet a frau, pop out kids, get a dog and live some semblance of a normal life while you're gone 250+. Go the smart route and make your pockets bigger. Rent.

[MilitaryToFinance]

Even if you do net some cash, it will almost surely be less than the money you'd have saved by paying less to rent.

but for a single guy in this economy, it doesn't make any kind of sense (financial or common).

Buying a house for the equity and tax advantages just doesn't exist anymore. Take the money you would save and double down in Vegas. I'd say the odds of turning a profit are about the same.

There are a lot of assumptions and terrible advice in this thread. When the market is crappy that is exactly the time to buy. There are numerous markets out there where buying makes a lot of sense. My mortgage payment, property taxes and HOA dues all total up to less than what it would cost me to rent the same place each month. It is a fallacy to think that you will always pay less by renting. I would strongly urge people to not take financial advice from this forum.

[Guest Crew Report]

There are a lot of assumptions and terrible advice in this thread. When the market is crappy that is exactly the time to buy. There are numerous markets out there where buying makes a lot of sense. My mortgage payment, property taxes and HOA dues all total up to less than what it would cost me to rent the same place each month. It is a fallacy to think that you will always pay less by renting. I would strongly urge people to not take financial advice from this forum.

So when you PCS, are you keeping the house, or trying to sell it?

[ViperStud]

There are a lot of assumptions and terrible advice in this thread. When the market is crappy that is exactly the time to buy. There are numerous markets out there where buying makes a lot of sense. My mortgage payment, property taxes and HOA dues all total up to less than what it would cost me to rent the same place each month. It is a fallacy to think that you will always pay less by renting. I would strongly urge people to not take financial advice from this forum.

Dude, this isn't the WSJ, it's Baseops. Guys post here asking advice from people who've been there, done that. My advice is far better than your non-advice, and I stand by it: real estate is a decent long-term investment if that's what you are looking for and you are comfortable with shouldering the risks/costs in order to benefit from the tax incentives and potential capital gains. That changes though if you go in knowing that you must sell in 3 years, regardless of what happens to the market in that short-term amount of time. If you go in thinking that you'll keep your house long-term, you'll be able to rent it out, and the market shows potential to appreciate, you minimize risk because short-term price fluctuations won't really affect you. If you plan on selling in 3 years, your profits will be offset by the costs of selling the house after 3 years, so hopefully the house appreciates enough to make it worthwhile.

Sure there are some good markets out there, but you don't control where Big Blue sends you so if you're going to buy you are forced to buy in that market. I've been on both sides of this argument: I bought and still own at my previous base, and that's worked out well. I came to my current base 3 yrs ago wanting to buy but decided to rent after I did some research, and now my peers who bought are all upside down, some up to $100K. Short sales abound, but granted I am in a location that was hit pretty hard. I am anything but uninformed on this matter, and I am telling you that if you buy, you must be open to the fact that you MAY have to write a check in 3 years to walk away. That or you need to be comfortable with being a landlord after you move on to your next base. If that's OK to you, then buy a house every time you PCS to a decent market, and in 15 or 30 years you'll own several outright.

Personally if I were going to be gone 250 days a year, I would split a rental with someone in the same situation, live on the cheap, and invest as much as possible. You'd have to find a great deal on a house in a good market to walk away after 3 years with a better net worth.

[Bronco130]

Best website to learn the in's and out's of becoming a landlord? I might buy here this summer (wedding next summer)... so I'd have 2-3 years on station w/ a wife, and as of now I'm leaning towards renting but would like to know everything that encompasses it.

[Banquet Beer]

Just out of curiosity, because I am researching the hell out of this thing...

If you look at it from a rent point of view, let's say you rent at $1000/month to make the math easy. At the end of 3 years you would have put $36k into rent (or $48k for 4 years).

Even if you sell 3-4 years down the road for the same amount you bought, wouldn't it be worth it even factoring in closing costs, fees, interest, etc?

You get tax benefits, the difference, and you don't live in a shitty crash pad while you are home.

Please tell me if this argument is flawed. Just the way I see it I guess.

[Tank]

I have bought and sold a house at every location I've ever lived. I personnaly would rather put my money into something that will better my credit rating and build equity than to help somebody else pay their mortgage. If you are OK with dealing with the pain of finding a house and paying closing and then dealing with it all over again in about 3-4 years, then I would say buying is a great option (especially with todays economy).

[ViperStud]

Just out of curiosity, because I am researching the hell out of this thing...

If you look at it from a rent point of view, let's say you rent at $1000/month to make the math easy. At the end of 3 years you would have put $36k into rent (or $48k for 4 years).

Even if you sell 3-4 years down the road for the same amount you bought, wouldn't it be worth it even factoring in closing costs, fees, interest, etc?

You get tax benefits, the difference, and you don't live in a shitty crash pad while you are home.

Please tell me if this argument is flawed. Just the way I see it I guess.

Using your example, sure you pay 36K over 3 years either way, but only 7.3K goes to principal, and those are real numbers from my first house.

I agree with your point philosophically but the reality of the situation is more complicated than bar napkin math. Every market is different. In some places you'll pay more to rent the same size/quality home than you would to finance it with a VA and $0 down, in others you'll pay the same, and in others you'll pay less. Taxes and insurance vary by location as well. If you put money down, then that money is essentially an investment at whatever your APR is, and it is at risk if the property devalues and you need to sell. So, if you paid 300K for a home that is now worth 250K and you put 0 down, maybe you still owe 285. You either write a check for that 35K at closing or the bank sells it short which will hurt your credit for 3 years but at least you don't write that check. If you had put 60K down, then maybe you own 220 on the house. You've still lost half that down payment. Shit, kinda wish you had put that 60K in a mutual fund or something at this point, don't you? Sure, the bigger tax refund for 3 years is nice, but once you get into 5-figure price drops that is all moot.

OK, that's the horror story of people having bought in Vegas, Phoenix, etc three years ago. Home prices having dropped in the past few years makes this a tempting time to buy, but it depends on where. Has it really bottomed out yet? Not everywhere, so that's a risk you shoulder. If your house appreciates short-term, then you'll be fine. If not, just be ready to be tied to that house long-term or go through the asspain/cost of getting out of an upside-down mortgage.

That applies if you are a singleton buying or renting a house. If an option is to rent and split the costs with a roommate (esp if you're gone the overwhelming majority of the time) then your rent is incredibly cheap compared to the cost of renting or buying alone. You'd be hard pressed to find a better deal financially than that. So, it comes down to (A) what's the outlook/risk for the market you're moving to, (B) know your options if you don't/can't sell when you PCS, © think of how much of a premium you'll pay to have your "own place" and whether it's worth it or not.

Keep in mind it's not just all about mortgage cost vs rent. There are a lot of hidden costs in owning vs renting: closing costs, HOA fees, termite bonds, repairs, appliances, taxes and homeowners vs renters insurance. Weigh that vs tax deductions and equity. You may also spend some coin getting the place move-in ready, particularly if it's a new construction, and it adds up quick.

I wouldn't scare anyone off from buying if they are making an informed decision, just don't do it based solely on the idea of "building equity" vs "paying someone else's mortgage." It's not always that easy. I'm glad I bought previously and am a landlord. I'm also very relieved that I'm currently renting.

[seatclearedhot]

Don't buy a house for investment purposes. People always mention they don't want to throw money away paying rent. But just the same, on a $200k mortgage, you are paying at least $900 per month initially towards interest, insurance, and property tax (plus maintenance costs); money you will never see again (like rent). In addition, the day you buy, you are immediately in the hole the amount you paid in closing costs plus another 6% for realtor fees when you decide to sell (ie, if you sold your $200k house the day after you bought it, you'd be almost $20k worse off). And finally, long term appreciation of real estate is around 4% per year. There are better investments out there.

[Smokin]

Don't buy a house for investment purposes. People always mention they don't want to throw money away paying rent. But just the same, on a $200k mortgage, you are paying at least $900 per month initially towards interest, insurance, and property tax (plus maintenance costs); money you will never see again (like rent). In addition, the day you buy, you are immediately in the hole the amount you paid in closing costs plus another 6% for realtor fees when you decide to sell (ie, if you sold your $200k house the day after you bought it, you'd be almost $20k worse off). And finally, long term appreciation of real estate is around 4% per year. There are better investments out there.

On the other hand, with interest rates this low and many markets bottoming out, this is a great time to buy. On a 200K mortgage with a good rate, your monthly expenses can be less than your BAH. When it comes time to PCS, you could have a reasonable chance at renting out the house with a property management company and still break even on the monthly payments. If you are willing to face the risks of home ownership and being an absentee landlord, you could have someone else paying off your mortgage for you. Yes, there are better investments out there, but there is also something to be said for having diverse holdings to include investments outside the stock market. Of course, that all assumes that you are not going to sell when you PCS.

[Guest Alarm Red]

Don't buy a house for investment purposes. People always mention they don't want to throw money away paying rent. But just the same, on a $200k mortgage, you are paying at least $900 per month initially towards interest, insurance, and property tax (plus maintenance costs); money you will never see again (like rent). In addition, the day you buy, you are immediately in the hole the amount you paid in closing costs plus another 6% for realtor fees when you decide to sell (ie, if you sold your $200k house the day after you bought it, you'd be almost $20k worse off). And finally, long term appreciation of real estate is around 4% per year. There are better investments out there.

You're missing the overall benefit. Yes, your initial payments are might end up sending $900/mo to interest, but they are still sending $300/mo to equity. 36 month assignment, that's 10K of BAH you get to keep in one form or another. If you rent it out, now you get to start keeping part of someone else's BAH. Having to pay out of pocket? Say you have to pay $200 out of pocket each month once you rent it out. You're paying $200 to keep the principal portion of someone else's BAH each month - which gets progressively larger as the mortgage gets paid down. Unless you bought a way overpriced house that you're now upside down on, it's generally a giant waste of BAH to rent.

[Herk Driver]

Just out of curiosity, because I am researching the hell out of this thing...

If you look at it from a rent point of view, let's say you rent at $1000/month to make the math easy. At the end of 3 years you would have put $36k into rent (or $48k for 4 years).

Even if you sell 3-4 years down the road for the same amount you bought, wouldn't it be worth it even factoring in closing costs, fees, interest, etc?

You get tax benefits, the difference, and you don't live in a shitty crash pad while you are home.

Please tell me if this argument is flawed. Just the way I see it I guess.

My $.02.

OK, a simple question for you...Can you afford renting or buying at your next PCS location, if you cannot sell or rent the house you bought at your last PDS? If you can, then go for it; if you can't, then there's a potential problem with your argument.

I think the overall point here is that when you own, you own. You don't get to call the landlord when a pipe bursts while you are gone. You get to call a plumber or a friend and that will cost you money not your landlord. Those issues are now yours to deal with/pay for. You owe the taxes, your owe the bank, you have to get the lawn cut - when you can't rent or are between renters. You get to worry about who you are renting to and if they trash your house when they leave. That could mean keepign the deposit. That could mean taking a guy to court to recover your expenses. Some rental markets will allow you to pay your mortgage and taxes and maybe make a little on the top; some will not and you will lose money.

I know a guy that bought in FL at the top of the market. He is upside down, has PCS'd and has had a lengthy period of time with no renters, currently he has renters that don't come close to covering the mortgage, much less any repairs or other expenses.

There is no one size fits all answer to what you are asking, but your view above is very simplistic. In your example, $48K to a landlord or about 80% (or more) of that to interest, fees, closing costs, etc and maybe squeeze out a profit or break even or make a tidy sum in an above average market. It really depends on who you want to "give" your money to and how much risk you can handle.

[ViperStud]

On the other hand, with interest rates this low and many markets bottoming out, this is a great time to buy. On a 200K mortgage with a good rate, your monthly expenses can be less than your BAH. When it comes time to PCS, you could have a reasonable chance at renting out the house with a property management company and still break even on the monthly payments. If you are willing to face the risks of home ownership and being an absentee landlord, you could have someone else paying off your mortgage for you. Yes, there are better investments out there, but there is also something to be said for having diverse holdings to include investments outside the stock market. Of course, that all assumes that you are not going to sell when you PCS.

Agree and that was kind of my point, if you're in it for the long haul it's a completely different story than if you're in it short-term. You really need to make that decision before you decide to buy vs rent. As far as "there's better things to do with your money," you're missing the big picture. If you buy a 200K house and rent it to break even after you move, then you have a $200K asset appreciating at maybe 3% (6K) per year and YOU ARE NOT EVEN PAYING FOR IT. Out of pocket costs for said $200K asset? Closing costs to buy, interest paid (but truly only that above/beyond what you would have paid to rent), and the cost of repairs & management. If you can break even when renting it out, you essentially reap the appreciation of the house over the long-term and have someone pay off the cost of acquiring the thing to begin with. In this example, you reap the benefit of 6K+/yr appreciation on an asset that only cost you (closing costs + mortgata-rent differential + repairs/mgmt). That's a pretty good return. The taxes you pay on the rental income should be wiped out by the deductions associated with interest, taxes, repairs and depreciation.

Of course these benefits come after you move and start renting it out, so the going-in assumption is still that you keep the house and are able to keep tenants in place.

[seatclearedhot]

You're missing the overall benefit. Yes, your initial payments are might end up sending $900/mo to interest, but they are still sending $300/mo to equity. 36 month assignment, that's 10K of BAH you get to keep in one form or another. If you rent it out, now you get to start keeping part of someone else's BAH. Having to pay out of pocket? Say you have to pay $200 out of pocket each month once you rent it out. You're paying $200 to keep the principal portion of someone else's BAH each month - which gets progressively larger as the mortgage gets paid down. Unless you bought a way overpriced house that you're now upside down on, it's generally a giant waste of BAH to rent.

Your example assumes that monthly rent = monthly mortgage, when in many cases, rent will be lower. But even if they were equal, and you are putting $300/mo to equity in your example (10k over 3 years), you still need to overcome the loss your are taking with closing fees and the 6% you will have to pay when you sell. Maintenance costs of owning a home are also higher than rent, sometimes considerably. And what if, when you move, you aren't able to sell your home right away? For each month your house is on the market after you leave, you are wasting $900/mo. You will never see that $900/mo again. If you decide to keep your house and rent it out, don't forget, you don't get to just bag that $1000/mo in rent you receive. You'll have to pay about 10% to a property manager since you'll be gone, maintenance fees, your property tax on your house will likely increase since it is now an income property, and you will have to pay income tax on the rent you receive. You'll be taxed at your highest bracket, probably 25%-30% for most people here, since it's all additional income. And don't forget, your rental property won't always be occupied. There will be times when it'll be vacant, and you'll be soaking up the entire costs.

Bottom line is, will you have more money in the long run if you buy or rent? It depends on how long that run is. For most military people who move every 3 years, you are better off renting in most cases. But, if you have a family, sometimes buying a house is a necessity, for the extra square footage/garage/yard for the kids, etc.

[KingGuy]

Anybody purchased a house or applied for home loans recently and have any advice on which bank is currently offering the best rates? I've heard Bank of Kansas City was really good a few years ago, any idea if they're still competitive?

Also found this gem from Bergman, posted back in 2006, a good year and a half before the huge fallout:

Banks apparently no longer care about whether you can pay your loan back...because they will approve you for an insane amount of money.

[Champ Kind]

I was about to use Kansas City but wound up using a local lender offering the same rate.

Kansas City was very helpful, had competitive rates, and replied to every message very quickly with exact answers to the questions I had. I was dealing with a guy named Jeff Smith.

Agreed on the amount. I am sure I dont have to tell you that you don't have to use all of what they offer you. As a rule of thumb, I tried to keep my total monthly payment (PITI-principle, interest, tax, insurance) to around 25% of my takehome.

[Jughead]

I've heard Bank of Kansas City was really good a few years ago, any idea if they're still competitive?

At the risk of getting Rainman's inner stalker going again , I gave some opinions on NBoKC in a several weeks ago. Bottom line, I've found them to be the best to work with, both in terms of rates and working through the process, particularly wrt their knowledge of military-specific issues. Feel free to PM me for more details or if you'd like a direct referral.

[POKESC17]

At the risk of getting Rainman's inner stalker going again , I gave some opinions on NBoKC in a several weeks ago. Bottom line, I've found them to be the best to work with, both in terms of rates and working through the process, particularly wrt their knowledge of military-specific issues. Feel free to PM me for more details or if you'd like a direct referral.

I'm working with them right now. Highly recommend them.

[Learjetter]

I used Wells Fargo on my last purchase (5.875/30 fixed in 2007) and just did a no-cost (really, actually got me $22 back) refi with Wells Fargo (4.875/20 fixed). Payment went up $14/mo. No points. All transactions/paperwork via email/.pdfs. They called me once, and I called them twice for minor stuff--never on hold, and both times i called them was after 7pm. Closed loan exactly on time, they sent an agent to me, on vacation five states away from home on closing day. Maybe better rates out there, but this worked for my situation. May call these KC bank folks next time...

[GoodSplash9]

I have a quick question for anyone who has recently taken a VA loan. VA loans require a "Statement of Service" letter that needs to be signed by "the adjutant, personnel office, or commander of the unit or higher headquarters they are attached to". I'm just curious where people typically go for this letter? Any help would be appreciated. Thanks!

[WeMeantWell]

I have a quick question for anyone who has recently taken a VA loan. VA loans require a "Statement of Service" letter that needs to be signed by "the adjutant, personnel office, or commander of the unit or higher headquarters they are attached to". I'm just curious where people typically go for this letter? Any help would be appreciated. Thanks!

I think you can get it yourself from Vmpf... you might have to look a little bit, but it should be there.

[Flare]

We just closed 2 weeks ago...my loan officer asked me for mine. When I told her I didn't have it, she took care of it and got it for me. No idea how.....

[AEWingsMN]

It's on VMPF, it's basically pre-signed by the gov't, just print it out. It's like hidden though.... VMPF, Self-Service (Sts), Personnel Data, Proof of service Letter.

Edit: now it just gives me dates, I coulda sworn 6-9 months ago it actually was a letter... well, hopefully it still works.

Edited November 10, 2011 by AEWingsMN