WWYD not knowing how long you'll stay in an area: rent or buy?

[MacMacMoo]

So I grew up on the school of thought that when possible you buy a house. Currently i'm finishing school while ds and i live in my mom's basement. DH gets back from deployment this summer and we are off to the other side of the continent for his new duty station.

part of DH pay is sort of earmarked for housing, hmmms lets say 1k a month. we could do what most military familes do and just rent on post. Essentially instead of paying you that 1k a month they provided you with a nice little house on base plus free water and electricity (up to a point).

Or we would take that 1k and rent a house or buy a house. To make it comparable the monthly payment would have to be 700-800 a month and rest going to utilities.

I grew up being taught you buy when possible. There are incentives to buy: its a buyers market. with the GI bill we would be able to get a loan without putting down a down payment. and i think there is a new tax incentive to buy a house... not sure.

the flip side is that we don't have a clue how long we will be staying put. Typically are in an area for 3-4 years. however they don't guarantee anything. could be as short as a year or more than 10 years.

What would you do?
sorry for being so long... but i figured knowing the background would be helpful...

[MamaMolly]

We rent because we also don't know how long we will be staying, a similar job/moving situation to yours. We don't anticipate the housing market to change considerably in this region, so if we bought we may not be able to easily sell in two years (or when ever the work moves us!). HTH

[Momof3Labs]

If you buy, consider what will happen if it takes a while to sell when they move you. Can you afford two mtg/rent payments? And I think that you are way underestimating things if you think that $800/mo for mortgage gets you to about the same place as $1000/mo for rent + utilities. How about the difference between homeowner's insurance and renter's insurance (it is not insignificant)? Property taxes? Maintenance? Can you afford a new roof? A new fridge? A new garage door? How about if all three hit in the same year?

[traciann]

in that price range I would be more inclined to go with base housing until you know the area and how permanent the stay is. I have read that the market is more likely to be this way for a couple more years.

[KBecks]

I would be inclined to rent. Aren't the first couple mortgage payments nearly all interest anyway?

[elliput]

It would really depend on the location and the housing market. There are advantages to each of the scenarios you have presented, provided the market complies with what you need. Investigate that thoroughly and I am sure you will make the best decision.

[SnuggleBuggles]

I agree that it depends where.

Our realtor had strongly advised us not to buy if we weren't planning on staying in the house at least 3 years.

Renting sounds like it could be a practical choice in your situation, imo. I did not grow up with the idea that it was best to buy a house if you could. Sometimes that isn't the best bet financially.

Beth

[MontrealMum]

We recently had to weigh these options and the difference between renting and mortgage + other homeowner expenses is about $850 to rent (heat included, and other expenses much lower such as maintenance) and nearly $2000 if you buy (which includes all sorts of taxes and upkeep). That's between two places of comparable size in comparable neighborhoods. Of course, that's here in Mtl, but it gives you an idea of the ratio. It might actually be worse where you are, prices in Mtl. are always on the low end, even in times of economic crisis.

Of course, you're building equity if you own, but if you don't have that much per month, you don't have it so it really doesn't matter. I would also caution you that since it's a buyer's market, it's not a seller's market in MANY places. So, if you need to sell and can't hold two homes at once, whether the new one's a rental or not, you're going to be in a tight spot. I think with the instability of your situation I'd rent if it's going to be 3 yrs or less because it sounds a bit safer with the present economic situation.

[kijip]

Rent unless you know you will stay for a long time. This is not a market to hop into for the short term. With the exception of a few bubbles, real estate traditionally returns about the rate of natural inflation. It's not a really wise short term investment, the recent super bubble aside. Really, don't buy based on monthly payments (the costs are higher than you think!) and don't buy if you will need to sell soon. It costs around 6% to sell unless you can sucessfully FSBO (rare) so unless your house increases in value by that plus the sum of any price differences between renting and owning (most places owning is more expensive) and the interest forgone on that sum, you are not going to earn a cent.

[mytwosons]

I know it's a buyer's market, but I can't think of one location I would move to and buy. Location, location, location is more important than ever. If you are new to the area, you would be guessing where the best place to live is. Even if we weren't in this economy, I would rent for at least a year in order to get a more accurate view of the schools, neighborhoods, etc.

I second everyone else that buying and the associated upkeep costs are way more expensive than renting.

We've lived in our house for 15 years, and our equity is wiped out. I don't even want to look at how much we've paid in mortgage and upkeep because I know it would be equal to a really nice rental with a lot less work!

[egoldber]

In your case I would rent or get base housing. I think you are significantly underestimating the cost of home ownership. The start up costs for a first home are pretty staggering. And the maintenance can kill you.

[KrisM]

I also agree that you can't get a $800 mortgage and a total of $1000 cost of housing. You'll have so much more than mortgage and utilities.

With my first house, I found I spent $100 at least every time I walked into Home Depot - I needed: water hoses, rakes, shovels, garbage cans for outside, etc. You'll likely need a lawn mower and/or snow blower, and other things. Sure those are one time purchases, but there are a lot of them that are tough to avoid.

We had 2 houses about 3.5 years ago. We bought before selling. We had zero mortgage on our first house and I estimated it cost us about $1000 per month just to continue to own it. We still had to pay property tax, insurance, utilities, someone to cut the grass (or we'd haul our lawnmower over, which was inconvenient), etc.

[maestramommy]

Both my Dh and I also grew up with the notion of buying when you can, but if I were only staying 3-4 years, my instinct would be to rent, esp. if I was unfamiliar with the area. If I knew I had to pick up and move fairly quickly, I wouldn't want to be stuck with a house I had trouble selling.

And I can't think of any place that would have houses with a mortgage of $800. I'm sure they exist, but near your Dh's base?

[KrisM]

And I can't think of any place that would have houses with a mortgage of $800. I'm sure they exist, but near your Dh's base?

Of course, the mortgage will depend greatly on the purchase price and the down payment. Our mortage is less than $800 and we're in metro Detroit in a 2200 sq ft house in a nice area. But, we put a lot down on the house to get it this low.

[rgavelis]

This is going to be a fairly lengthy post so I apologize in advance.

This is a hard decision but here are a few things to think about and a lot of people have already mentioned them:

Even though it is a buyer's market you have to consider that when it comes time to sell your house, it may be on the market for quite a while. We sold ours in six months and I was overjoyed by that. Also, when you take a VA loan, you are only allowed to use it on one house at a time and you are required to live in the house. Once you sell the house and all the paperwork clears, you can reapply for the loan and use it on another house. If money is tight, I personally would steer clear of buying because of all the unexpected costs that come with maintaining a house (roof, plumbing, heating, etc.)

As far as base housing, depending on what base you're stationed at, some housing offices have a wait of over a year to get into housing. This option is pretty much like renting except you won't have a whole lot of choice as far as the layout. Your entire housing allowance will be used up if you use this option. Some people have been able to successfully find a place to rent out in town well under their housing allowance and have been able to pay most of their utilities with the money that is left. In base housing, cable and phone services are not included.

Anyway, that's just some food for thought. Feel free to PM me if you have any other questions. Good luck.

[vonfirmath]

I would recommend renting. You don't want to buy unless you are pretty sure you will be remaining where you are for at least 3 years (and better, 5)

I would DEARLY love to buy. But I keep having to tell myself this. There are plenty of people right now in the painful spot of paying for houses in two areas because they had to move and could not sell the house in the old place.

[secchick]

I would recommend renting in your situation. First, if you are counting on not putting anything down and doing 100% financing, when you have to move, you may not have sufficient equity to even cover real estate commissions. That's even if you are living in one of the best markets in the US (Where I am, we are the big winners for the 20 major metro areas home price predictions for 2009, and we are expected to remain flat, of course, we only saw 3% or so increases annually for the last decade, so it all evens out over time). If you cannot put money down and can't guarantee that you'll be there for 3-5 years, I would rent or stay on base housing (whichever is cheaper) and save the excess for a downpayment later, when things may be a little more certain.

[bethie_73]

part of DH pay is sort of earmarked for housing, hmmms lets say 1k a month. we could do what most military familes do and just rent on post. Essentially instead of paying you that 1k a month they provided you with a nice little house on base plus free water and electricity (up to a point).

with the GI bill we would be able to get a loan without putting down a down payment. and i think there is a new tax incentive to buy a house... not sure.


2 things, I won't go into the cost of owning as others have.

1st, DH and I both grew up in military families and they both had always rented. Until they knew they would be in a place for a while. Base housing isn't always great, but it is reasonable and will let you get to know the area.

2nd, it isn't the GI bill it is a VA loan, and you need to consider that it does cost. You can roll up to 4% of closing costs into the loan if necessary, and you will also need to pay the VA funding fee, it is 2.15% of the loan for Active Duty the first time, then each time you want to use it, if you do not put money down, it increases to 3.3% the next time etc. You should really look into these fees. You can not have 2 VA loans at the same time.

HTH

[squimp]

It may be a buyer's market, but that will hurt you when you have to sell. You also have to have a 20% down payment, in addition to the mortgage. There are also a bunch of fees which you will not get back unless the value of the house goes way up in the short time you own it (very unlikely in this market) - this is partly the reason that people often say you should know you're going to stay 3-5 years in a house before you buy. I've generally heard 5 years.

[niccig]

We've lived in our house for 15 years, and our equity is wiped out. I don't even want to look at how much we've paid in mortgage and upkeep because I know it would be equal to a really nice rental with a lot less work!

We're in the same position. We would like to sell and have worked out that we'll break even like we had rented for the last 4 years, but that's WITHOUT maintenance. Add that in, and we've spent much more.

[jamesoja]

We made the wrong decision and bought a home after being PCS'd here 3 years ago. We are now moving again and have to sell this house. Like almost all housing markets, ours is over saturated with homes for sale and home prices continue to drop every month. We have put a lot of time and money into our home which we will not be around to recoup. Your DH BAH will likely not cover a mortgage/insurance/utilities bills, and the last thing you want is all your money going to a home payment with NO room for extras/emergencies.

There are no guarantees with housing/real estate being a safe place to put your money, as was the case with your parent 30+ years ago.

My advice, take base housing. It is not glamorous however you will never see a bill for home expenses, the contractors bill the govt. You will have no upkeep/repair responsibilities. Plenty of spouses on base to interact with and the convenience of the commissary and Xchange are well worth it.

If you 100% against living on base, then rent a home. Downsides to home rental with only $1000 BAH is safety of the neighborhood/ location from base/post, dependable neighbors for when your DH is deployed will they be willing to help you if needed?

Again, these are only my thoughts as we have lived through it and looking back the decision is much clearer now. Also FWIW many of our friends who originally bought/rented off base are now moving on base, or have their names on list to get back on base.

Good Luck!

[C99]

In most RE markets in the country, you'd be a fool to buy.

[MacMacMoo]

I'm glad the majority says to rent. As someone pointed out the market it not like that of our parents, and the parents are the one pushing for the buying. Let me rephrase that my parents lean towards buying his parents having been prior military say live on post.

We were leaning towards the third option neither of them would address which was renting.

I would like to note that my "under estimating" of housing is not as under estimated as many make it sound. I just didn't want to go into full blown detail of our comparison of the apples to oranges. I recalled most things, though i must admit i did forget to factor in property tax...