Posted on Nov 25, 2013
To buy or not to buy a house while on Active Duty?
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I worked for an E-7 who had purchased a house at each of his 8 duty stations during his 22 year career. He held on to those houses and hired a property manager for each. When he retired, he owned five of those houses outright, was 12 months away from having the other three paid off, and was set to play golf for the rest of his life....while living better than he ever did while working for a living. If you manage your money properly, buying homes while on active duty can set you up for life. If you have piles of debt before you buy your first house.....you are at a MUCH greater risk of suffering significant losses as a result of a home purchase with such a short window of personal use.
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PO3 Matt Schmidt
Fantastic response! Thank-you for sharing Lt. I agree--there is a way to build wealth through home ownership while serving. It takes planning and maturity, but it can really pay off.
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<font color="#000000" size="3" face="Times New Roman">
</font><p style="margin: 0in 0in 10pt;" class="MsoNormal"><font size="3"><font color="#000000"><font face="Calibri">I was fortunate to buy a house at several of my duty
stations and resale for a profit, each time. You need to do some homework. Research the
area, how are the schools, what other industries are in the area besides the
military. Don't buy a 2 bedroom, they are hard to resale. Don't always rely on the real estate agent to do a fair and honest comparative
market analysis for you, conduct your own. Take a course in real estate for
your basic knowledge, one thing you will learn is everything is negotiable.</font></font></font></p><p style="margin: 0in 0in 10pt;" class="MsoNormal"><font color="#000000" size="3" face="Calibri">Helpful hint- just becuase you qualify for $400,000 doesn't mean you can afford a $400,000 house. Look at what your budget can afford, and don't forget on mortgage loans taxes and other associated fees happen later and before you know it you are in a hole and the alligator will bite you.</font></p><p style="margin: 0in 0in 10pt;" class="MsoNormal"><font size="3"><font color="#000000"><font face="Calibri">A word of warning there are no <span style='line-height: 115%; font-family: "Calibri","sans-serif"; font-size: 11pt; mso-ascii-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-theme-font: minor-bidi; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;'>guarantees</span> and it is a risk.</font></font></font></p><font color="#000000" size="3" face="Times New Roman">
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</font><p style="margin: 0in 0in 10pt;" class="MsoNormal"><font size="3"><font color="#000000"><font face="Calibri">I was fortunate to buy a house at several of my duty
stations and resale for a profit, each time. You need to do some homework. Research the
area, how are the schools, what other industries are in the area besides the
military. Don't buy a 2 bedroom, they are hard to resale. Don't always rely on the real estate agent to do a fair and honest comparative
market analysis for you, conduct your own. Take a course in real estate for
your basic knowledge, one thing you will learn is everything is negotiable.</font></font></font></p><p style="margin: 0in 0in 10pt;" class="MsoNormal"><font color="#000000" size="3" face="Calibri">Helpful hint- just becuase you qualify for $400,000 doesn't mean you can afford a $400,000 house. Look at what your budget can afford, and don't forget on mortgage loans taxes and other associated fees happen later and before you know it you are in a hole and the alligator will bite you.</font></p><p style="margin: 0in 0in 10pt;" class="MsoNormal"><font size="3"><font color="#000000"><font face="Calibri">A word of warning there are no <span style='line-height: 115%; font-family: "Calibri","sans-serif"; font-size: 11pt; mso-ascii-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-theme-font: minor-bidi; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;'>guarantees</span> and it is a risk.</font></font></font></p><font color="#000000" size="3" face="Times New Roman">
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PO3 Matt Schmidt
That is a great statement: "Just because you qualify for $400,000 doesn't mean you can afford a $400,000 house." Good piece of advice!
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GySgt William Hardy
You are right. When I was on active duty in Germany, I did taxes. One Army MSG hired me to do his taxes. The guy was a millionaire. As a young trooper he never went out and spent his money on wild women and booze. He started a savings account and he said he put every other pay raise into savings and every other pay raise he kept for cost of living. When he had enough money, he invested in utilities, primarily Tom Ed and over the years his wealth increased. Now as he was getting close to his retirement, he not only had his military retirement and military benefits, but he had more money than almost everyone on the post, certainly more than any enlisted personnel. If you are smart and research your market, you can make some good decisions about real estate just like you can with stocks. You have to know what you are doing. Your last paragraph is especially true. Just because you can doesn't mean you should. I remember a young SGT who took his reenlistment bonus and bought a Corvet and then turned around and sold it for a loss because while he could pay for the car, he found he couldn't afford the insurance nor the gas to keep it going.
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I won't buy a house on Active Duty because when I buy one that means I'm permanently settling down there for the long run....ready to plant roots and watch them grow. Not to mention I plan on building mines and I think I'll LOVE being the first (and only) occupant to live in it, with my family of course.
Being Active means I'd have to rent it out to unknown tenants and that's a chance I don't want to risk or take.
Being Active means I'd have to rent it out to unknown tenants and that's a chance I don't want to risk or take.
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PO3 Matt Schmidt
That's an interesting take, SGT. In my line of business we explain to active duty members that building wealth is possible, but one cannot be expecting to find a dream home. A dream home, as you point out, is the house you build once you are ready to settle down. But, there is an opportunity to build wealth through home ownership prior to settling down.
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GySgt William Hardy
Another point I would like to make is that some of my friends bought a house because it was cheaper than renting and you didn't have a nosy landlord checking up on you. When it came time to rotate overseas, they left their family there. I was in the Marines and getting an accompanied overseas tour was very rare. If they did not get orders back to the same base, the wife would put the house on the market and usually there was a good profit to be made and they did it over again at the next duty station. If you do your homework before you buy, reselling after a few years in not that hard to do.
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GySgt William Hardy
PS - Also keep in mind that the government is footing the bill though the housing allowance. Those that live on post/base may not have to worry about a lot of things while completing a career, they also have nothing at the end of the career. By buying a home with your housing allowance, selling for a profit, and reinvesting in another house, and doing it several times, it is very possible to have the government pay your rent for 20+ years plus help you to buy that dream home when you retire. That is something the younger guys and gals need to consider. Building your wealth like Matt was talking about.
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Every market is different and you have to evaluate each neighborhood based on a comparable market analysis. I have a real estate program that allows me the opportunity to do a market analysis and market trends for almost any address in the US. I will caution everyone to understand, there are many variables that need to be taken into consideration; what is the age of the house? Older homes require more maintenance and you need to know the age of the mechanics of the home as well as the roof. What is the appreciation rate of your community? Most communities appreciate between 2.7%-4.3%. If you have questions... contact me. My wife and I own a real estate franchise, I am a general contractor and we got started in the real estate business by flipping houses while still on active duty... in Kansas! We have been in North-central Florida for 18 years.
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Excellent question!
In my case, I lived in base housing most of my USAF career so that when it
came time to PCS, I wouldn't have the extra stress of having to sell a
house every time.
house every time.
When I got out, I bought a house and paid it off as fast as possible.
That way.....no mortgage to worry about!
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I also have to agree with the fact that if you are ready to settle for good that you can buy while still on active duty, possibly rent it out while being stationed somewhere else. Eventually return to that home later when you are done on duty if that is where you plan on settling or sell it if need be as well.
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I bought a place in Escondido in 09 and have managed to stick around the area. I have had to do a little more sea duty then I wanted, but thats fine. It took me a long time to go out and buy a house. I always thought it was not a good thing to do while on active duty especialy with the 2 year primary residence rule that the VA has. I wish now that I would have bought earlier in my career.
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TSgt (Join to see)
I buy on active duty as its cheaper and your saving money instantly vs renting. I sold my house when I got orders in a week. Didn't make money but I didn't pay anything either. Took over my loan and I walked away with a fresh VA loan for my next base and a newly married airmen got an affordable house.
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PO3 Matt Schmidt
The VA primary residence rule is only for 1 year and there are always exceptions. I agree with you on purchasing earlier. I made the mistake of not purchasing while I was on active duty and regret it to this day.
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Depends on the location. Personally, I will not buy while on active duty.
~Good~
I bought a house (and sold it two years later) in Savannah, GA and made a profit when I sold it.
~Bad~
I moved to just south of Atlanta (between Forts McPherson and Gillem) bought a house and lost money for years and finally went through the deed-in-lieu of foreclosure process (after failing to get approved for a short-sale on two separate occasions).
Note: Both Forts McPherson and Gillem closed due to BRAC.
~Bad~
I moved to just south of Atlanta (between Forts McPherson and Gillem) bought a house and lost money for years and finally went through the deed-in-lieu of foreclosure process (after failing to get approved for a short-sale on two separate occasions).
Note: Both Forts McPherson and Gillem closed due to BRAC.
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PO3 Matt Schmidt
I am very sad to hear about the failed short sale process--home ownership is certainly a long-term investment.
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If you can afford the payment, buy a house or condo and enjoy it. You are gaining equity while making the payments and you get the government tax benefits too. When you PCS out, don't sell, keep it and hire a rental company to rent it out for you and have someone else make your mortgage payment for you. When you move, and your income supports it, buy another house, live in it and enjoy it and repeat the process as many times as possible. When you retire, you will be so far ahead of the game with your rental income, and possibly paid off properties, you will be able to do anything you want.
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One of the biggest advantages to purchasing while on active duty is the fact that BAH is untaxed--That is a huge benefit. Not to mention, the interest deduction you can take each year when filing....
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