Author Topic: To rent or to buy... military style  (Read 3840 times)

T Money

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To rent or to buy... military style
« on: January 07, 2015, 01:55:33 PM »
Alright Senior Mustachians, I have a conundrum for you.  I'm trying to figure out whether to rent or to buy, but it's not as simple as the average civilian mustachian's situation.  I posted this question once already, but I feel that my post was too jumbled and unorganized and I didn't receive a lot of feedback.

I am currently allotted between $1100 and $1200 (holy shit right?) for my housing allowance.  I'll leave the exact amount out to keep my location mysterious.  My first thought is that this is a whole lot more than my wife and I need for a place to live, and I need to do something with that amount, but then it gets messy.  Here's some important information for the situation...  There are only 3 towns/cities that would be considered such close to base.  Town A is 16 miles away, Town B is 30 miles away, and Town C is about 20 miles away.  Now this is a military installation, so naturally all three towns have a higher than normal crime-rate.  Town C has a considerably higher crime-rate than the other two however, and with that has significantly lower-priced houses.  Now that huge number might make more sense.  No matter where I choose to live to get any significant nature experience I will have to drive or bike for at least 3 hours, yay.

I could live in base housing and not receive this allotment at all.  All utilities and house-care is free and all I would need to pay for is internet and renter's insurance.  I could easily bike anywhere on base, including work, and all would be well, except I'd be wasting all that money away.  There's some setbacks to this problem.  My wife might have to commute the 30 miles to Town B if she can't find work on base and can't find a job in the other two tiny towns.

I could choose to live in Town B, which is more of a city and has a lot more things to do and offer, and assume about 1,043.57 miles of commuting to work every month, not counting any random recalls or situations I would have to come in for.  So that's about $417 a month leaving me with only a bit over $700 a month to rent or buy a place and break even over living on base.  I could bike to work potentially, but that's a lot of time spent biking after a long shift at work.

I could live in Town A, halfway to Town B and assume $222 in commuting costs, but now my wife is going to have to commute somewhere for work because there are no job opportunities here.  So at a maximum I now have $900 to spend on rent/buying a house to break even, and prices in this town are significantly higher than the other two.  Biking is a much higher possibility here.

I could live in Town C, assume a cost of $278 a month to commute to work, but my wife will also have to commute either the 20 miles to base or the almost 60 miles to Town B.  That leaves me with around $850 to buy or rent a house.  Housing prices are super low here, but the crime rate is high, and it's not a very desired place to live unless you have to for work.  Biking is an even higher possibility for this town because of the quaint back roads.

The prospect of commuting 30 miles to work every day does not excite me, but neither does letting that allotment go to waste in base housing.  I feel that I should go out and put that to work in a mortgage (totally at least $55,000 in four years) so it's doing some work for me instead of wasting it on base, but I'm just not sure if it's worth it.

Any advice? :(

MsPeacock

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Re: To rent or to buy... military style
« Reply #1 on: January 07, 2015, 02:03:39 PM »
What is the condition of the base housing? Some bases have nice/new largish houses that are well worth living on post. Yes, you lose the BAH - but you gain no commmute, good place to live, no cost to maintain/repair, etc. Do you have children in school? How are the schools on base vs. in town A, B, C (because even if you don't have children this will effect your ability to resell a property). Buying a house always comes w/ the associated risk of a PCS at a time that is not good to resell. The military is downsizing - so there is a good chance that there will be excess housing available near military bases in the next couple  years. This should likely push down the price of rent as well as the sales prices of homes. It seems in all your possible senarios either you and/or your wife have a commute - but if you live on base you will not have a commute and your wife may or may not.

I think there are non-financial and non-commute up and downside to living on or off base. I personally always peferred to live off base because I needed emotional and physical distance from work - but I never had the issue of such a long commute to deal wtih.

T Money

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Re: To rent or to buy... military style
« Reply #2 on: January 07, 2015, 02:09:37 PM »
Yeah the commute is really a bummer.  That's the only thing I dislike about my current base.  A surprise PCS could happen, but in my occupation it's very rare to get orders without putting in for them, so if I wanted to stay here for all 4 years it's almost guaranteed.  My wife and I don't plan on having kids anytime soon, but Town C has a good school and town B has a lot of good and bad ones being so large.  Downsizing of the military will probably effect Town's A and C, but not so much Town B however.

I want to live off base to get away from it while I'm off duty and to put that money to good use, but it just doesn't seem like I can make it work.

driftwood

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Re: To rent or to buy... military style
« Reply #3 on: January 07, 2015, 02:26:05 PM »
I've got the same debate going on.  Where I'm at now it's worth it to live on base so that's what I'm doing.  I'm looking at buying a house at my next assignment, or living in a smaller house and banking that BAH.

Our housing is really nice and the neighborhood is not crowded.  My bicycle commute is 25 min with a loaded bike trailer.  I biked in to the last recall and only one other person in my unit beat me to work!  Everything I need is on base.

I'm sad seeing that BAH all go away, but in this one assignment its worth it for us.

Are there literally no rent options between the towns and the base?  Could you rent near base, and bike to work, but still bank some BAH? Do you have to live in a town?

flyfig

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Re: To rent or to buy... military style
« Reply #4 on: January 07, 2015, 02:29:09 PM »
Could you share some info on what housing in Town A, B and C are like and the price points?
Also, could you consider a motorcycle for commuting? Your commuting costs seems really high.
With only 4 years, renting seems a better option than buying. Just my 2 cents.

My husband (military, with a 2000 BAH) and I live in a studio in a "bad" part of town. We pocket over 50% of the BAH each month. The neighborhood is actually fine, the neighbors nice and a small studio means we keep our possessions to a minimum. No kids as well.

There is a lot of what-ifs. Is there something you and your wife could do to narrow the possibilities? That should help in the decision making process.

Mazzinator

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Re: To rent or to buy... military style
« Reply #5 on: January 07, 2015, 04:21:47 PM »
I agree, i think we need more numbers.

Actual rents for each town, and housing prices. Also, i would suugest you read up on the 50% and 2% rules of thumb to see if any of those houses would make a good rental (in case you want to rent it out vs selling it when you move)

i understand if you want to keep your location private, but without more numbers it's hard to give advice.

Also, i think you should subtract utilities and maintenance from your equation also vs on post housing.

For the record, my husband is military in hawaii (bah $4,000) and we pay $2550 in rent for an upstairs apt. Holy hawaii...

Nords

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Re: To rent or to buy... military style
« Reply #6 on: January 11, 2015, 04:34:05 PM »
I could live in base housing and not receive this allotment at all.  All utilities and house-care is free and all I would need to pay for is internet and renter's insurance.  I could easily bike anywhere on base, including work, and all would be well, except I'd be wasting all that money away.  There's some setbacks to this problem.  My wife might have to commute the 30 miles to Town B if she can't find work on base and can't find a job in the other two tiny towns.

I could choose to live in Town B, which is more of a city and has a lot more things to do and offer, and assume about 1,043.57 miles of commuting to work every month, not counting any random recalls or situations I would have to come in for.  So that's about $417 a month leaving me with only a bit over $700 a month to rent or buy a place and break even over living on base.  I could bike to work potentially, but that's a lot of time spent biking after a long shift at work.

I could live in Town A, halfway to Town B and assume $222 in commuting costs, but now my wife is going to have to commute somewhere for work because there are no job opportunities here.  So at a maximum I now have $900 to spend on rent/buying a house to break even, and prices in this town are significantly higher than the other two.  Biking is a much higher possibility here.

The prospect of commuting 30 miles to work every day does not excite me, but neither does letting that allotment go to waste in base housing.  I feel that I should go out and put that to work in a mortgage (totally at least $55,000 in four years) so it's doing some work for me instead of wasting it on base, but I'm just not sure if it's worth it.

Any advice? :(
You seem to be interested in finding your spouse a job working at someone else's company.  Can she do her own entrepreneurial work with crafts or sales?  Can she start a blog or a website with products?  Can she tackle remote work (from home) as a call center employee or doing freelance work?  Can she volunteer at the base family support center or fitness center or tours/tickets office for a few months and turn that into an entry-level job?

She's not the first military spouse to face these challenges, and she can do better than settling for a minimum-wage job with a long commute.

Do you have to buy a house?  You could choose to rent in town and bank the rest of the housing allowance into the stock market or even into CDs. 

Otherwise, if you buy a home then over a four-year period you're hoping for at least two things to go right:
1.  Buy and sell a highly illiquid asset without paying 6% transaction fees on at least one sale, in an area that may or may not be in demand.
2.  Find tenants (in these lovely towns) who will pay your landlord costs of carrying the rental property (those costs are a lot higher than your mortgage payment).
3.  Find a place that costs less to own than to rent (after adding maintenance, repairs, property taxes, and homeowner insurance).

A surprise PCS could happen, but in my occupation it's very rare to get orders without putting in for them, so if I wanted to stay here for all 4 years it's almost guaranteed.
I have to admit, I nearly snorted coffee on my keyboard at this comment.  You are in the U.S. military, right? 

I guess that's one more thing you'd have to count on going right during a four-year period.

However making a profit in real estate in even four years requires some extraordinary MrMoneyMustache-class home-rehab sweat-equity skills on your part, or else you'd have to own property in a rapidly-growing community.  You need to stop waving around your housing allowance and do the research on the 20 or so properties in your area that you could acquire at a discount and turn into a profit for your labor.  If your spouse is seeking a job, maybe she'd be interested in construction rehab or a realtor's license. 

All of this may work out great for you, but you should also consider the very real impact that the financial risks could wreak upon your net worth:
http://the-military-guide.com/2015/01/01/dont-buy-home-active-duty/
It's hard to say that the profits of short-term home ownership would compensate you for the very real risks that you're contemplating.

For the record, my husband is military in hawaii (bah $4,000) and we pay $2550 in rent for an upstairs apt. Holy hawaii...
We're renting out a 4BR/2BA single-level home for $2900/month but trying to decide when to break the news to the tenants that it's going up to $3000/month.  Whether or not we "have enough", we have to run that property like a business. 
« Last Edit: January 11, 2015, 04:39:15 PM by Nords »

flyfig

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Re: To rent or to buy... military style
« Reply #7 on: January 12, 2015, 02:14:06 PM »
I could live in base housing and not receive this allotment at all.  All utilities and house-care is free and all I would need to pay for is internet and renter's insurance.  I could easily bike anywhere on base, including work, and all would be well, except I'd be wasting all that money away.  There's some setbacks to this problem.  My wife might have to commute the 30 miles to Town B if she can't find work on base and can't find a job in the other two tiny towns.

I could choose to live in Town B, which is more of a city and has a lot more things to do and offer, and assume about 1,043.57 miles of commuting to work every month, not counting any random recalls or situations I would have to come in for.  So that's about $417 a month leaving me with only a bit over $700 a month to rent or buy a place and break even over living on base.  I could bike to work potentially, but that's a lot of time spent biking after a long shift at work.

I could live in Town A, halfway to Town B and assume $222 in commuting costs, but now my wife is going to have to commute somewhere for work because there are no job opportunities here.  So at a maximum I now have $900 to spend on rent/buying a house to break even, and prices in this town are significantly higher than the other two.  Biking is a much higher possibility here.

The prospect of commuting 30 miles to work every day does not excite me, but neither does letting that allotment go to waste in base housing.  I feel that I should go out and put that to work in a mortgage (totally at least $55,000 in four years) so it's doing some work for me instead of wasting it on base, but I'm just not sure if it's worth it.

Any advice? :(
You seem to be interested in finding your spouse a job working at someone else's company.  Can she do her own entrepreneurial work with crafts or sales?  Can she start a blog or a website with products?  Can she tackle remote work (from home) as a call center employee or doing freelance work?  Can she volunteer at the base family support center or fitness center or tours/tickets office for a few months and turn that into an entry-level job?

She's not the first military spouse to face these challenges, and she can do better than settling for a minimum-wage job with a long commute.

Do you have to buy a house?  You could choose to rent in town and bank the rest of the housing allowance into the stock market or even into CDs. 

Otherwise, if you buy a home then over a four-year period you're hoping for at least two things to go right:
1.  Buy and sell a highly illiquid asset without paying 6% transaction fees on at least one sale, in an area that may or may not be in demand.
2.  Find tenants (in these lovely towns) who will pay your landlord costs of carrying the rental property (those costs are a lot higher than your mortgage payment).
3.  Find a place that costs less to own than to rent (after adding maintenance, repairs, property taxes, and homeowner insurance).

A surprise PCS could happen, but in my occupation it's very rare to get orders without putting in for them, so if I wanted to stay here for all 4 years it's almost guaranteed.
I have to admit, I nearly snorted coffee on my keyboard at this comment.  You are in the U.S. military, right? 

I guess that's one more thing you'd have to count on going right during a four-year period.

However making a profit in real estate in even four years requires some extraordinary MrMoneyMustache-class home-rehab sweat-equity skills on your part, or else you'd have to own property in a rapidly-growing community.  You need to stop waving around your housing allowance and do the research on the 20 or so properties in your area that you could acquire at a discount and turn into a profit for your labor.  If your spouse is seeking a job, maybe she'd be interested in construction rehab or a realtor's license. 

All of this may work out great for you, but you should also consider the very real impact that the financial risks could wreak upon your net worth:
http://the-military-guide.com/2015/01/01/dont-buy-home-active-duty/
It's hard to say that the profits of short-term home ownership would compensate you for the very real risks that you're contemplating.

For the record, my husband is military in hawaii (bah $4,000) and we pay $2550 in rent for an upstairs apt. Holy hawaii...
We're renting out a 4BR/2BA single-level home for $2900/month but trying to decide when to break the news to the tenants that it's going up to $3000/month.  Whether or not we "have enough", we have to run that property like a business.

+1

Siobhan

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Re: To rent or to buy... military style
« Reply #8 on: January 12, 2015, 02:42:27 PM »
Nords, there are a few MOS's and units that are fairly set nowadays.  My husband for example would never have to leave his current unit if he didn't want to, we're guaranteed six years at this station at a minimum and some of the folks have been there most of their career, generally only leaving when KD time isn't available, then they go do KD time and come back. 

CheapskateWife

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Re: To rent or to buy... military style
« Reply #9 on: January 12, 2015, 02:59:38 PM »
Hello OP!

I work in base housing at a rather large installation and have some thoughts for you to consider...

Some installations are having a hard time filling their base housing, and are having a hard time competing in markets where there is a glut of housing close by.  In your case, where there are towns relatively close, your local housing folks might be offering "Market Rent" where the private management company on base lowers their "rent" to keep competetive with outside the wire slumlords.  When you are looking at your new assignment, that is a really good question to ask.

You also brought up the commute thing...ahhh we mistakenly thought a 60 mile commute for me might work.  It was a great job, lots of opportunities for growth, blah, blah...I didn't make it 9 months. 

Is it just the two of you?  Here is something else to consider.  Depending on your rank, you may be funnelled into the older smaller housing on base rather than the newer sexy stuff with 4 bedrooms that is popping up across all the installations that are privatized.  And whether you are taking a new house or a 40 yr old house, if they aren't doing market rate, you will pay the same as a family of 6 for your little bitty house.

That wasn't any real guidance, I know, but if you want to PM me to get some specifics, that would be fine.

As for buy or rent....look, if you can't see retiring there, I would really recommend against buying a home.  And if you jump into base housing, you get to terminate that lease when you want to.  You can take your time, get the lay of the land, figure out where the spouse is going to get a job, and give it a year before you decide to dip your toes into the real estate market. 

mm1970

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Re: To rent or to buy... military style
« Reply #10 on: January 12, 2015, 03:15:19 PM »
I was about to ask how you can pocket 50% of BAH, because, they don't let you keep the extra?

Then the cobwebs got brushed away and I realized I was thinking VHA.

I would probably live in base housing.  It sounds like the numbers line up better.

And +1 on Nords running the rental like a business.  My town right now has a really tight market, and 2BR houses are going for $3000 a month.  Many people looking for Sect 8 and complaining about "greedy landlords".  Ha!  A lot of the landlords are breaking even only on that, based on when they bought. Some of them broke even/ lost money for years and are now making money.  Others bought their houses for $50k 30 years ago and are making bank.

However you slice it, to buy the same house costs more, so...

T Money

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Re: To rent or to buy... military style
« Reply #11 on: January 17, 2015, 12:24:51 AM »
Sorry to everyone that I didn't get back to you in a timely manner (currently deployed), and thank you for all your advice.

My wife and I have decided, in true mustachian fashion, that we're going to rent off-base in the cities (34 mile commute for me one way to work ~1330 miles maximum per month) and share a house with a few friends.  We're still young so we don't have a yearning to settle down alone and have a bunch of kids at this point in our life.  We'll be content with sharing a home and getting a low-cost rent.   Even with calculating my commute at 50 cents/mile my housing allowance will pay for it all and my wife will have a very short commute for work and school.

Thank you guys!