I am PCS to the CGC Sea Lion in Bellingham, WA. I am single, 24yo, and 6yrs AD. I am looking to buy a home in Bellingham. I am looking at residential homes, and with 3 bedrooms- this will allow me to have 2 roommates to pay rent, and contribute towards the mortgage.

The PB is only a 2yr gig, and while there is always a chance to extend there, this makes me nervous. In this area, a decent non-manufactured standalone single family 3br starts around 170k. W/taxes and insurance, that puts my monthly payment at around $1400/mo. I have done a TON of research, including on other threads. I am just looking for some 3rd party insight.

What options do I have if I indeed rotate in '10? I know that renting out is an option. I also know that property manager is an option. How possible is it that the value can go up in 2yrs, 10+thousand? Everyhting is cheap, and everyone says buy.

Appreciate any and all insight...

-Jason

Jason,
Normally I would recommend buying.. BUT.. in today's economy, with you being single, I would recommend you rent at this time.. save your money for a deposit later on in life...

Wray..

Wray, I was hoping you'd add your 2cents.

Do u reccommend the same, even considering that I intend to have roommates live with me, paying off the mortgage?

Can you give me more insight as to why you think that it's a bad call right now? For the most part, everyone is saying buy buy buy. I think I remember you mentioning awhile back that u bought multiple homes throughout your career...what was different then than now? Im looking for as much education as possible. Thx for the reply...

If you are only going to be there 2 years it will be almost be impossible for the house to appreciate enough in value to cover the expense of selling it.

Realtors typically want 6% . So if you bought a house for 170 and went to sell it 2 years later you would have to get $180200. to break even just on the realtor's fee.

In the current market 6% return annually is almost unheard if.

Now if you are going to do the 2 years on the PB and then take a job at the District or ISC or even Station Seattle well then maybe it is a good idea to buy , but you can never bank on those follow on orders.

BTW anyone want to buy a really nice house in Louisiana? Its vacant and in move in condition!

Jason.. you can't count on roomates...they may or may not be there when you need them... If you have them while you rent, that is that much more you can put in your pocket...

The economy is so unstable.. no telling what it will be like in 18-24 months.. if you were married you could always leave your wife and go as a geo.. with roommates, they will bale, and you will be stuck with the mortgage. What if you got on a WHEC? What if you couldn't rent your house? You would not only have to pay the mortgage, but the yard maint.

The more you can save the less your monthly payments will be when you do get a house.. if you put 20% down you don't have to pay mortgage insurance.

Yes I did buy several homes.. and they all increased in value... My first one, righ here in Daytona was a 2 bed, 2 bath with a carport... it cost $14,500 TOTAL cost.. my monthly payments were $99.00

Each house after that cost more, next one was around 30K, then 45K then 75k, 150K and my final one here 200K... It has more than doubled,,, but, I also have a townhouse that was my Mothers,,, it didn't sell a year ago, so I took it off the market.. use it to keep cars & motorcycles in it.. rent it out for races & bike week. That works well for me...

Hope that helps... As I said, buying, in your situation, I would consider very risky... just my opinion.

Wray...

Thx for the replies, Wray and CDR. I feel that when I make the decision to buy or not, it will be a very educated move, in part thanks to your input.

It is soo tempting right now. I put my feelers out for roommates on Craigslist and roommate websites, and just over a few days, Ive received over 20 serious inquiries. My initial thoughts were to buy, have roommates, then rent out potentially with a mgmt agency, then hang onto it for a few years or maybe a decade until the value goes up enough to make some $$. Or maybe do what you did Wray and hold onto her for the long run. The potential does exist for the home to be empty for a few months, and with my calculated ~$1300-$1400/mo mortgage payment, yikes. So yes, I see the potential risk there. I see rental rates for houses in my price range to be ~$1000-1300/mo. So, as risky as it sounds, how CRAZY would it be to take the risk and see what happens?

Oh and I talked to USAA today, why are interest rates going UPPPPP!! Last week it went from 6% to 6.25%. This week, up to 6.5%. You'd think they'd be still falling!!??

Keep firing away, please and thank you......

This message has been edited. Last edited by: Jason_Greene,

Jason, Pat gave you some excellent advise. It takes more than 2-3 years to show a profit...

Be careful with Craig's list.. full of phonies... Should you decide to buy, try to get military into it...

Property managers get 10% off the top.. THere are also a lot of bad ones out there.. BE CAREFUL.

WHen the market comes back I will probably put my Mothers townhouse back on the market.

Wray..

Another item to fully understand on the financial side of this, which I am not able to give you advice on, is the full impact of your intention to purchase a place as a partial investment property. There may be tax implications (both regular income and at the potential sale end) by having 2/3rds of the house as 'rental property' and only 1/3 as primary residence.

Come to think of it, it might also have an effect on your loan...

This message has been edited. Last edited by: Mightyz90_93,

Wray, I definitly have gotten quite a few illegit folks on craigslist. They are getting more and more clever and discreet with their scamming. But the number that I mentioned are people that spent more than a couple mins on the phone with me, who sound reliable and responsible.

I understand the lack of probability for the house to go up enough in value to make a profit in ~2yrs, as you and CDR said. The chance is there, but slim. I'm not banking on that happening, but would lean more towards longer term- renting it out. I mean, there will always be renters, yes? Bellingham is a huge college town, with some CG.

MC- My agent warned me about those very dangers. I called USAA and spoke with them about it. They say that absolutely nothing changes if I were to have roommates, since it is still my primary residence. I guess the only time anything will change is if I buy another home before this one is paid off...

...Which gets me thinking about- what if I meet a special lady over the next few years, and would like to do that very thing. Wont be able to use the VA loan again for awhile.
I look at it this way too....I have spent ~$45,000 on RENT over my 6year career. Thats a quarter of the price of a home in my price range in the area, less interest. Instead of traveling around the country paying others' mortgage, its so tempting to want to pay towards something thats yours, which could pay out over the long run.



Based on everything I've told you gents, can you classify HOW risky this looks to you, based on your experience (not calling any of you 'old'!) I need to make the buy no-buy decision like now, and am at this point right down the middle.

I don't have any experience to give you except that I have made the choice to rent vs buy. Now, I wish I could get a bail out for my bad choice like all the people who stupidity was buying to much house on a variable APR of 1% and then being surprised when they can't afford the house when the APR bumps up. When I made the choice to rent here, I probably had less than a 20% chance of being here more than 2 years. That was 6 years ago! I got two more years at least left here! Just keep doing what you are doing and ask a lot of questions and think things through. Make sure once you get ideas from folks for free, then talk to PROFESSIONALS who get paid and have a fiduciary responsibility to you to give you the right answers. For instance, I don't see any reason to not believe your LOAN guy that this plan won't affect the loan. BUT, I find it hard to believe that you could write off all of you interest expenses when you have tennants. They are that - tennants, not room mates. Maybe pay a H & R Block guy an hours worth of time to go over that too. (Actually, if doing a VA loan, I might ask a VA Loan professional about it too. Good rule of thumb, if anything smells a little fishy, there probably is a reason that it does!)

I agree with everything Wray said. better to hold off for now. And while you are waiting you may want to consider opening a seperate account (Savings or money market) and start pushing money into it. Keep it seperate from any other savings you may have going and that way you won't be tempted to dip into it. Over time that will work to greatly increase your down payment which can result in less risk and a lower interest rate.

MC- are you saying that you wish that you would have bought instead of rent? Or are you saying that you got yourself into a variable interest mortgage?

Jason, here is my final advise.. rent for your next tour.. then see how things are going.

Never, take an ARM... that is why so many people (like my brother in law - a MAJOR (USAF (Ret)) are walking away from their houses...

I have a fixed 15 year, 5.5 %

Good luck.. I think we have covered about everything.. the decision is yours.

Wray...

quote:

Originally posted by Jason_Greene:
MC- are you saying that you wish that you would have bought instead of rent? Or are you saying that you got yourself into a variable interest mortgage?

I am renting. If I had known that I would be here for eight years, I would have bought for sure and have probably have a 1/4 mil in equity right now - even with the slump. BUT, if I were to do it again, still believing I only had about two years here, I would still rent. Of course knowing what I know now, yeah I wish I would have bought.

MC's and Cdr- thx for taking the time to reply. I have no clue as to what I want to do yet. I'm carefully weighing renting vs. buying, risk/gain, etc. I wish there was a GAR model for this decision. I have invested more time looking at the rental market in the area, which isnt too appealing.

Not sure if I've ever faced such a critical decision making situation.

quote:

Not sure if I've ever faced such a critical decision making situation.

In which case you are better off renting. If you buy you run a significant risk. If you rent, you don't.

Start stashing money and in a few years when things are more stable you will be in a better position to buy.

Good news and not so good news:

Good: The VA no longer allows an ARM as part of its home loan program. When you qualify for a loan you must state whether or not the home is intended to be your primary residence. If that is the case then get qualified on your income alone. If the property is an investment property, i.e. to be used primarily as a rental property, you are subject to higher interest rates and you will not be eligible for a VA loan for that type of property. There are a lot of people who buy a house intended as their primary residence but also may rent out a room to someone. The key is, is it YOUR primary residence?

In terms of renting rooms, you must research zoning laws where you are considering buying. For example, no more than 4 unrelated people can live in one residence in my area. The number of related people is based upon the number of bedrooms (the living room can also be used as a bedroom) of 2 per room. Bedrooms must meet code requirements (must have a closet and two points of egress. If a room is in a basement and has a small window, it is not a bedroom). So, a 4 bedroom property in my area can board up to 10 related people. Check with your county regarding how many unrelated people may live in the house your purchase.

Not so Good: You are taking a big risk buying with a chance of leaving the area in 2 years. The days of leveraging money are over for a while.

Only my opinion-

We buy where we go, always. We have sold twice in 4 years. Had we not done that, we wouldn't be sitting in a new house right now.
This is the time to buy. But be very careful. Real estate is your biggest investment, and if you can find renters to pay some of the mortgage, then I would def. do it. I would have them sign a year lease. And don't rent to anyone due to PCS within the next 2yrs.

If you bought a home for $170,000 now, and paid off $$ by yourself, and added what the renters paid, then you would be getting that money back when you sell. Even at 6% commission, as long as you paid down some principal (putting the renter's money down as principal). Say you sell for $170k + 6% + other closing costs, you would be breaking even. You do need to do your homework, making sure you buy in an area where the houses appreciate. Even in this market, you can snag up a great deal. Sellers are eager to sell and are willing to negotiate. Just do the homework first before buying anything. Also, think of size and location. It is hard to sell a home with fewer than 3 bedrooms. Most families are wanting 3-4 bedrooms. Look for high rent districts, or near colleges where in case you had to hold onto the home for longer once you PCS it will be easier to rent out.

Worst case, if you couldn't sell for more than you bought it, you could rent it to Military until the market comes back up.

I wouldn't get a 15y, I would get a reg. 30y conventional loan. Yes, you do save money getting a 15yr, however if you don't plan on holding onto the home the costs maybe too high.

I am very optimistic when it comes to buying real estate now, I think pretty soon there won't be enough loans out there with low interest rates. So now is the time to buy.

The ones who take risks, make better returns. If you were to wait until 2yrs from now, who knows where the economy will be. You may not be able to sell in two years, but if lending dries up, where do you think people will live? In your rental

This message has been edited. Last edited by: Tonys_hag,

quote:

Even at 6%, as long as you sell for $170k + 6% + state/county tax + Attorney fees.

I had to run actual numbers on this. Lets say you take out a loan for $170,000 and you have ZERO closing costs. (fat chance, buts lets use it). Any simple amortization schedule wil show you that two years later you will still owe $165,505. (after having dished out $24,461 just in P & Int, not counting PMI, taxes, insurance, etc). If you sold for $170,000 you would get a check at closing for $159,800 minus any fees or closing costs not included in the 6% commision fee). That means you would have to produce ~$5700 check out of pocket to close. You would have to sell for at least $176k just to make up for the agent's commision and that is if they do the 'standard' 6%. (add in the other associated closing costs too).

As for the 'interest rates could be at 10%' comment, I don't see how that could be a positive for someone who believes they could have to sell in two years. If it was a life-long house, than that means buying now is good. It would put a HUGE crimp on being able to sell for any reasonable price in two years. IF you could find a buyer that could get afford a loan at that rate, the sales price would unlikely be near what is needed to break even.

MC-

I have been very, very carefully considering all factors involved. Notably, I have taken some of the comments from you and Wray to my agent, as well as to the vast number of other people I have spoken with. I have gotten very diverse opinions from all, somewhat depending on the person's particular life experiences. To say the least, I value the traffic you and Wray are sending my way.

After several hours on the phone with USAA, and several hours talking to my agent (I acknowledge that both of them benefit from me making a purchase), I have gained quite a deal of insight. Still a bit fuzzy here and there, but asking ALOT of questions, to alot of people.

I am looking at a house that was purchased in '04 for 150k. It, and others in its league in the area, are now around 180k. I looked at the house, and will be having a fairly savvy personal friend do an initial inspection of the home, prior to even hiring the inspector. I HAVE NOT decided that this is what I want to do yet, and am still seeking education and am doing risk assessment.

- The asking price is 190K.
- Looks like the seller will accept $184K, -AND- cover the closing.
- VA Funding Fee puts loan amt to $188K
- Interest w/USAA today is 6.34 I think.
- Prop tax= ~$1300/yr
- H.I. Insurance= ~$1100/yr
- Monthly TOTAL payment= ~$1200

Plan.

- 3 bedroom house.
- Have 2 coastie roommates to move in and pay
rent and live with me.
- Split utils.
- Make mortgage payment, still have
small positive cash flow from
roommates, +some of my BAH which will be
net. With this, make SOME extra principal payments, put some away for fall back, and still have some for improvements. Roomies are also renting at a rate that provides them a net of their BAH, and is on the level with the renatal rates of the locality.


In 2 yrs, if I dont stay here, I rent out. Potentially throw it on market, depending on value. There are 3 CG units in the area, and 3 colleges. Find a GOOD (as Wray highlighted) property manager, or perhaps a reliable, responsible Coastie to manage the place. Rent out until value is good, or for the long haul.

Selling is NOT a must IF I PCS in a couple years. I see the risk of the variables, I think:

- Home value in 2yrs.
- Interest Rates in 2yrs.
- PCS in 2yrs.
- Rental Market in 2 yrs.



I see these risks, but I think that they are manageable with the potential gain in sight. I am getting alot of feedback about "selling in 2 yrs." Without scrolling up to check, I dont know if I mentioned the possibility of renting it out earlier. It is an option. Wray, you did that a bunch, why could it be a bad idea?

I'm not jumping in head first, so please keep the personal insight coming, as I value it highly. I've put ~$50,000 in others' mortgages over the 6yrs I been in the guard...and while I have read the theories and outlooks on renting vs. buying, I am wondering if I'd rather take the risk NOW, potentially break even or even make some money over a few years, then look back and say that I wish I would have. That obviously isnt the soul driving force behind my thought process, but nonetheless is a factor.

MC, I dont plan on coming to you in a couple years asking to put in for the special transfers so I can stay and pay my loan. *IF* I proceed, it will be because its an acceptable risk, and not one that will make me have to look for help LATER when people were warning me now.

I am putting all this on here to seek your respected opinions, as whats here is just *A* PLAN. This isnt *THE* plan, or me trying to negate any of the points made by all here. I am genuinely looking for more detailed opinions. Wray and MC, If you dont think I have the rental listings bookmarked next to the real estate agents, I do. I will need to make this decision this week in order to plan on having a place by report date.

Wray, what specific risk do u see in what I drew out?

Again all, thank you.


Wray, MC- If you're really interested, I can email you a link to the particular property, if you wanna bounce one over to me first. Also, please use the email for any input thats more personal than whats flowing.

jason.j.greene@gmail.com

This message has been edited. Last edited by: Jason_Greene,