Being in the military, I initially thought I would not buy a house until I got out. After researching the topic, I found some articles about some great success stories of people retiring from the military, owning 4+ houses, and a net worth of over 1,000,000. Of course, there are always people who loose money in this situation as well. I know some people that won't rent because they say they are throwing money away.
Those great successes might reflect survivor bias & confirmation bias. You hardly ever read about servicemembers who lost money on their homes, but the stories are out there.
In 1989 we bought a Hawaii property for $277K. A year of sweat equity later, we put it on the market for $425K and had a contract at $385K. We couldn't swing the financing on the home we were buying so we canceled our sale contract. A year later the market was down to $300K. By 2000 the home was appraised at $230K. Today it's assessed at about $550K, which almost precisely mirrors the last 20+ years of inflation. We're still landlords, and right now life is good, but it can turn nasty in one phone call. It was a lot nastier when we were landlording from 2500 miles away, but even five miles can be a hassle.
The financial aspect of rent vs own is difficult to analyze. Do you throw away money every month on mortgage interest (while building some equity) or on carefree "wasted" rent? Do you forego greater returns in the stock market while saving your down-payment fund in CDs or a bond fund? Do you lose money every month as a long-distance landlord, or do you lose it all at once as a distressed seller who has to move while the market is down?
I usually try to discourage servicemembers who want to buy a home on active duty, because the risk of financial loss is so high. However there are a few hardwired born-to-be-landlords out there who'll buy a home at every duty station and insist that they'll make a profit over the next couple decades. It can be done, and you'll work for every penny of it. For the vast majority of servicemembers, though, I think the hassles of landlording far outweigh the benefits.
Does anyone want to share some experience or advice about buying a home in the military.
Guest post Wednesday: Financial independence on an E-5 paycheck | Military Retirement & Financial Independence (Note that this homeowner was not required to buy flood insurance because "it never floods there".)
If I only knew then what I know now | Military Retirement & Financial Independence
So you want to be a landlord. | Military Retirement & Financial Independence
Real estate: rent or buy? | Military Retirement & Financial Independence
You might also want to e-mail Kate Kashman, who writes the "Paycheck Chronicles" blog for Military.com:
http://paycheck-chronicles.military.com/ She's landlording two American properties from Europe. And raising four daughters. And her spouse is on staff duty.
If you must persist in this ambition, then read the landlording references linked in the posts-- especially Gallinelli's blog.
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