Author Topic: Dilemma, cash and a PCS move  (Read 1720 times)

MishMash

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Dilemma, cash and a PCS move
« on: August 03, 2016, 11:32:37 AM »
So we were anticipating an additional 3 years in the current duty station but got news that it may be as short as moving this time next year (or it could be two, or the original three, don't you love how the military lets you know plans in advance).  I can't really complain though as we've been here 4 years already.

Dilemma:  We have 240k sitting in cash at the moment earning a "lovely" 1.05%

-  110k of that is proceeds from a rental house we JUST sold.
-  130 is what is left of a large sum that we received in March, 50% of said sum went immedietly into Vanguard, we've been DCA'ing the rest into Vanguard since then.


Original Plan was to dump all this money into the market and let it ride however, now that we may have a move coming up in the not so distant future, I am wondering if it isn't prudent to keep half of it in cash for a potential home purchase next year.   

Assets right now

1.212m of investable (including the 240 from above)
140k in current residence

I'm leaning toward keeping half of it in cash as we would sell this house when we move, allowing us to pay cash for our next place.

"But what if you move AGAIN" well, happy to say, this will likely be the last move, as he will hit his 20 year mark in 5 years (1 year here and he's guaranteed 3-4 in the new spot) and with what he does, he's fairly well positioned to get the duty station he wants in FL, which is the state we want to establish residency in for his inevitable retirement.  In 5 years, he may decide to sign on for another 3, just to maximize his pension (dependent on promotion lists and rates), which means we would move, but at that point we'd rent out the house and rent at the new duty station. 

Not sure if we should take the plunge and dump it into the market or hold onto half (about 120k) in case we move next year.  What say you?

Drifterrider

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Re: Dilemma, cash and a PCS move
« Reply #1 on: August 05, 2016, 06:15:56 AM »
What is your current duty station and what is the rental market like there?

There are many articles against active military buying a house until retirement but I don't follow that line of thought.

My father bought his first house in 1956 (military town) and immediately rented it.  We didn't move into it until 1968.  It had been a rental for 12 years at this time.  We lived in it for two years before moving to the house next door (which my father also bought).  We lived in that house for 7 years before moving overseas. 

House one has been a rental for all but two years.  House two has been a rental for all but 11 years.  House 3 has been a rental since my father bought it in 1992.  Again, military town but the tenants have been the civilian market for a long long time (BAH is much more than the rents the houses make).

Father retired in 1972 as an E-6 so we didn't really come from money.

Have you considered buying a house you can live in now, then rent when you PCS?  You will get better rates as owner/occupied.

MishMash

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Re: Dilemma, cash and a PCS move
« Reply #2 on: August 08, 2016, 08:42:31 AM »
What is your current duty station and what is the rental market like there?

There are many articles against active military buying a house until retirement but I don't follow that line of thought.

My father bought his first house in 1956 (military town) and immediately rented it.  We didn't move into it until 1968.  It had been a rental for 12 years at this time.  We lived in it for two years before moving to the house next door (which my father also bought).  We lived in that house for 7 years before moving overseas. 

House one has been a rental for all but two years.  House two has been a rental for all but 11 years.  House 3 has been a rental since my father bought it in 1992.  Again, military town but the tenants have been the civilian market for a long long time (BAH is much more than the rents the houses make).

Father retired in 1972 as an E-6 so we didn't really come from money.

Have you considered buying a house you can live in now, then rent when you PCS?  You will get better rates as owner/occupied.

We are in DC, and yea we don't prescibe to the "don't buy a house until retirement" thing.  We've bought at every duty station, rented them out, then sold them.  This house...well this house we HATE and we're going to sell it when we move because it's got more problems then it's worth, plus it's a townhome, in an HOA, in a military, and college location so the renters I don't have much faith in.

The one in FL we are considering would be that, we'd live in it for the 3-4 years, then if he opts to stay past 20, rent it out until he decides to leave.  I"m just not sure if we should hold the cash from the rental sale for a year or two and pay cash for the next house (it will probably take me some time to find a job), or invest it and try to rely on selling the house in DC for the down payment on one there.

Drifterrider

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Re: Dilemma, cash and a PCS move
« Reply #3 on: August 08, 2016, 12:39:36 PM »
What is your current duty station and what is the rental market like there?

There are many articles against active military buying a house until retirement but I don't follow that line of thought.

My father bought his first house in 1956 (military town) and immediately rented it.  We didn't move into it until 1968.  It had been a rental for 12 years at this time.  We lived in it for two years before moving to the house next door (which my father also bought).  We lived in that house for 7 years before moving overseas. 

House one has been a rental for all but two years.  House two has been a rental for all but 11 years.  House 3 has been a rental since my father bought it in 1992.  Again, military town but the tenants have been the civilian market for a long long time (BAH is much more than the rents the houses make).

Father retired in 1972 as an E-6 so we didn't really come from money.

Have you considered buying a house you can live in now, then rent when you PCS?  You will get better rates as owner/occupied.

We are in DC, and yea we don't prescibe to the "don't buy a house until retirement" thing.  We've bought at every duty station, rented them out, then sold them.  This house...well this house we HATE and we're going to sell it when we move because it's got more problems then it's worth, plus it's a townhome, in an HOA, in a military, and college location so the renters I don't have much faith in.

The one in FL we are considering would be that, we'd live in it for the 3-4 years, then if he opts to stay past 20, rent it out until he decides to leave.  I"m just not sure if we should hold the cash from the rental sale for a year or two and pay cash for the next house (it will probably take me some time to find a job), or invest it and try to rely on selling the house in DC for the down payment on one there.

I'm about 40 miles south of you.  I don't think I'd buy in DC as a rental.

Are you a member of Navy Federal?  I believe they are offering the best rates on a jumbo CD. 

I believe I'd put the money in a bank for now.  I probably wouldn't pay cash for a house right away unless I knew I wanted to stay there indefinitely.  I'd rather take a mortgage (I could then always pay it off early) and have available cash. 

MishMash

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Re: Dilemma, cash and a PCS move
« Reply #4 on: August 08, 2016, 01:13:26 PM »
Yea I've seen what renters do to houses in our neighborhood, it's not pretty. 

We are navy fed members, currently have 10k in the 3% 18 month CD they were offering in June.  Their rates on the 12 month aren't that much better then what I am getting in the savings account (.05%), they are offerring a 2% 2 year CD but they recently upped the early withdrawal penalties on longer term CDs so that it's probably not worth it if I have to take it out prior to the 2 year mark. 

I like the option of paying cash, since it is the state we want to move to when he's done, however, if interest rates are still this low we may get a mortgage.  I think it'll be good to have it on hand in case we have to go forward with purchasing while this one sells.

robartsd

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Re: Dilemma, cash and a PCS move
« Reply #5 on: August 08, 2016, 01:54:23 PM »
Since you plan to sell your current home, your assets there should provide enough of a down payment in the case where mortgage rates are favorable when you relocate. If mortgage rates have gone up enough that a cash purchase would be more desirable at the time you relocate, what is the chance that the overall stock market has declined? I think that mortgage rates increasing without significant stock market gains is very unlikely, so I'd probably invest most of the money in a low cost stock market index fund.