Rent vs Buy in DC Area

[Spicolli]

So my wife, who is in the military, will start working in the Bethesda area next July for 3 years. We have enough saved to put 20% down on a $300-$400K house/townhouse in the area but am wondering what the MMM community would do. I am of the opinion that we should rent, not buy, unless we were willing to turn it into a rental property after the 3 years since the buying/selling process is not free. Any opinions?

[tralfamadorian]

So my wife, who is in the military, will start working in the Bethesda area next July for 3 years. We have enough saved to put 20% down on a $300-$400K house/townhouse in the area but am wondering what the MMM community would do. I am of the opinion that we should rent, not buy, unless we were willing to turn it into a rental property after the 3 years since the buying/selling process is not free. Any opinions?

Unless the rent for a similar house or townhouse is between $3-4k/mo, then no.

[leavesofgrass]

I'd definitely rent until you are settled longer-term.

You're right, there are a lot of costs that go into a home purchase besides the purchase price. While there are upsides to owning real estate and becoming a landlord, it can come with a lot of headaches. If you move, you'll be managing long-distance or you'll have to hire a company. Ugh.

[Basenji]

Initial take: rent. But what's your wife's BAH going to be? Do you have school-age kids? Need more info.

I assume you've read this: http://www.mrmoneymustache.com/2015/07/27/rent-vs-buy/

I'd be surprised if there ARE any $300-400k town homes for sale in Bethesda. Maybe in other neighborhoods/towns, but you'd have to watch the commute. So many variables in such a varied area that it's hard to give you advice, e.g., your (not your wife's) likely job location, how far you are willing to commute, kids/no kids (school districts), need for outdoor space, how large a place you want, lifestyle (do you like more urban/suburban/country-ish).

I'd be surprised if you can find a place that will fulfill the 1%/2% rule for renting it out later (https://affordanything.com/one-percent-rule-gross-rent-multiplier). This is what tralfamadorian is getting at with saying you'd need to be able to rent it out for $3-4k/mo. when you leave DC. So that would be a $400k DC townhouse renting for $4,000/month. Nah gonna happen.

[Spicolli]

Initial take: rent. But what's your wife's BAH going to be? Do you have school-age kids? Need more info.

I'd be surprised if there ARE any $300-400k town homes for sale in Bethesda. Maybe in other neighborhoods/towns, but you'd have to watch the commute. So many variables in such a varied area that it's hard to give you advice, e.g., your (not your wife's) likely job location, how far you are willing to commute, kids/no kids (school districts), need for outdoor space, how large a place you want, lifestyle (do you like more urban/suburban/country-ish).

I'd be surprised if you can find a place that will fulfill the 1% rule for renting it out later (https://affordanything.com/one-percent-rule-gross-rent-multiplier). This is what tralfamadorian is getting at with saying you'd need to be able to rent it out for $3-4k/mo. when you leave DC. So that would be a $400k DC townhouse renting for $4,000/month. Nah gonna happen.

Thanks for the replies. We would be geographical bachelors (me and kid stay in CA)...at least initially. Her BAH will be about $39.5K per year. Looking for a 2 BD/1.5-2 BA place from Kensington to Rockville/King Farm with a good community feel, somewhat close to Metro and bike paths. Part of me preferring to rent is that school district wouldn't matter unless we decide geo-bach is too hard and we move out to her. At which point, I'd probably be a stay at home dad and school districts would matter. Renting would give us flexibility to move if needed. If we bought, we'd want to be in a good school district. 

[Basenji]

Thanks for the replies. We would be geographical bachelors (me and kid stay in CA)...at least initially. Her BAH will be about $39.5K per year. Looking for a 2 BD/1.5-2 BA place from Kensington to Rockville/King Farm with a good community feel, somewhat close to Metro and bike paths. Part of me preferring to rent is that school district wouldn't matter unless we decide geo-bach is too hard and we move out to her. At which point, I'd probably be a stay at home dad and school districts would matter. Renting would give us flexibility to move if needed. If we bought, we'd want to be in a good school district.

Have you geo-bach'ed before? Just for that wrinkle I say she should rent. Good luck!

[frugaliknowit]

Rent.  If you buy, you have a good chance of "losing money" vs. renting.

[Villanelle]

If you are geobaching, I think the best strategy would be to find the cheapest place possible and rent.  Perhaps even a room in someone else's home or a little basement apartment.

You are going to be paying for two households and unless you have some special circumstance, you will only be getting one BAH.

And have you looked in that price range to see what is out there?  And then comparing that to rent on similar properties?  We are currently looking in the Alex/Arling/CrystalC/PentagonC area, but you'd need almost double that budget for nearly anything.    And houses that would cost about $700k would rent for about $3000k, so there's no way you could get anywhere near 1% rule unless the Bethesda is very different.

We will be going on 3 year orders and haven't even really considered buying because the numbers don't work, and that doesn't even factor in the pain of being an absentee landlord, which we are already doing once and really don't want to do again. And if we were going to be maintaining two households, the priority would be 100% on cheap. 

[Spicolli]

Thanks again for the replies! It appears that places that would cost $300-$400K to buy are renting around $1.9K-$2.2K, so not too close to the 1% rule. We have geobached before on 5 month deployments recently and 1 year (pre-kid though) and made it work. One aspect in DC I was trying to factor in is the effect Amazon will have on the area...albeit they will be based southwest of DC and we will be north, I'd imagine there will be some "trickle up" to Montgomery County.

[mozar]

It may be that there is a trickle up affect but people who already live here are way ahead of you. There has already been an uptick in buying in selling in Norther Virginia. I don't know much about real estate but I would think the completion of the purple line would have a bigger affect on Bethesda than Amazon. Montgomery county tends to be a separate market than Northern Virginia. The same buy and sell rules still apply. Don't buy unless you plan to stay more than 5 years or you are a real estate investor.

[coffeefueled]

I second the comment that MD is a different market than Northern VA so don't count on the Amazon bump. It's not far by miles but it is light years when you consider traffic. No one I know working in northern VA commutes from Maryland. I don't think this is a good area to try to make money on short term housing speculation. I suggest renting.