She's on a 3-year tour and coworkers are telling her she'd be throwing money away by renting. As her Dad I'm not so sure. A 30-year mortgage on a timeline you don't control seems risky.
Has anyone actually run the numbers on this? What did you end up doing and do you regret it either way?
My daughter keeps hearing "just buy, BAH covers it, then rent it out" at her first duty station — is this actually good advice?
byu/Helpful_Ant_3084 inMilitaryFinance
Posted by Helpful_Ant_3084
10 Comments
Only if she is emotionally prepared and has the house maintenance experience necessary to be a landlord
Except having your VA loan tied up in a rental is kinda stupid
In this economy? No its a terrible idea.
Been in 18 years. Own 5 houses that are rented so far. 3 paid off. All positive cash flow.
So bottom line is It works – if you are married and your spouse works it’s a lot easier to manage the risk.
However to make it work In the end it requires overpayment of the mortgage payments so you can refi when you leave, lower the mortgage, and raise the cash flow for each house. Leverage deployments and if single get roommates to let them help pay it off.
I know people who have done this quite successfully. There’s certainly money to be made, and the ability to purchase homes with no money down is pretty compelling.
That said, there’s risk involved. If she understands the risks, it’s her life.
So I’ll give you a higher level answer:
Younger investors, especially with super stable military income, and the potential of a pension should be taking out much more risk than 100% stocks for an optimal lifecycle allocation. A mortgage is one of the few ways young people can access large amounts of leverage in a tax advantaged and non-callable manner. That being said, there are major drawbacks…
– Concentration risk (one property, one market)
– Illiquidity
– Operational risk (tenants, maintenance, vacancies)
– Behavioral drag (you’re now a part-time property manager)
I’m of the opinion that your primary residence should never be considered an investment, rather a consumable that should be directly compared to renting. Given the fixed BAH based market of military towns, you can generally rent a MUCH nicer apartment or house for the money. Renting is not “throwing money away”, it’s a fixed cost of consumption that will be paid whether you choose to rent or buy your primary residence.
https://youtu.be/j4H9LL7A-nQ?si=EVjewpUvjKiAxZsC
Only worthwhile in my opinion if she’s ready to be a landlord. She can be moved as quickly as 24 months even if it’s supposed to be 3 years. Things can change fast, assignments included.
I would only do this in a location I’d consider retiring someday to secure it for the future (no hate to you ambitious real estate tycoons)
I bought once and it was a terrible experience between maintenance costs, housing bubble bursting, gapped months, and lackluster tenants. If she doesn’t plan on living in it for more than one tour I’d say her better bet is to invest in stocks instead and save the headache.
What’s her rank? Are you prepared to help her if she needs to cover a mortgage and rent in her next duty station? Does she have access cash for maintenance and upkeep?
Only if the math makes sense. It’s not always cash flow positive. We bought right now and we’re definitely not going to be able to rent this out as our mortgage is higher than current rental market rates.