Renting or Buying? How to Make that Decision during a PCS!
As we get ready to celebrate the Holiday Season, military families know what the next “season” is going to be! “Waiting for orders season” for about one third of us each year and most orders arrive in the late winter/early spring for a summertime PCS! Unless you were the Kissingers, who seemed to get a lot of “you will appreciate this assignment”, so don’t complain about the 2 week notice type of orders. But with the PCS comes the difficult issues of what to do about housing! Certainly tough choices for a military family and we thought it would be a timely subject. MilitaryAvenue has a long standing relationship with USAA so we went to one of their experts to discuss some ideas of when to rent or buy! We have a lot of experience of our own with 18 moves in 30 years of service but thought you would like to hear from a specialist as well!
Rich Novak, USAA Assistant Vice President Home Circle Integrated Solutions, agreed to pass on his insights to us so we could share them with you! Rich is a former Scout Helicopter Pilot with the Maryland Army National Guard. With a Masters Degree in Business Administration he has been employed in the real estate finance industry with several major companies and has been a USAA member for 20 years. We talked about flying first and then jumped right into what is the #1 decision point for renting or buying. While difficult to narrow to one point, Rich said that the time you expect to live there is it! Two years or less, rent is the best option! But even if expected to have a longer tour think about the potential impact of early orders (yes, the Kissingers when deciding to buy homes, had that happen twice on “long tours”). If the market is a difficult one, can you sell? Have you thought through the “what ifs”? Make a list of them and see how they impact your decision! What if we have to sell and can’t? Rent our home? Loss of BAH housing due to orders, can we still pay the mortgage? How much is property management? So many things to think about! One great article on MilitaryAvenue provides some great resources during this process! “MilitaryAvenue.com Resources: Buying a Home” This article has some great rules of thumb, other experts and experiences of military families, mortgage ideas, tax advantages, the DoD Expanded Homeowners Assistance Program (HAP) and much more. MilitaryAvenue has a Moving Tools tab as well with great resources for your use!
Of course, money is the key to this decision but we want schools, pride of ownership and stability in our often tumultuous lives as well! I asked Rich, if USAA had tightened the criteria for a mortgage loan? He said that the rules were set by government lenders such as the VA, FHA, Fannie Mae and Mac and that USAA had to comply but they were best at assisting the military family with their vast military experience in the housing marketplace! I agreed with Rich that “USAA goes the extra mile” to help its military members find their way through the paperwork and other necessary evils of home buying/selling/renting. The new USAA Home Circle program which launched in August is the first step for a military family seeking to do research on home buying or renting! The major topic tabs are Buying, Selling, Renting and Owning! I am thoroughly impressed that renting has been added as a necessary tool for military families during this market downturn from USAA!
The housing market downturn has been much worse in some locations than others! How does that impact your decision, was my next subject for discussion with the expert and he said it definitely mattered! Rich grew up near DC and described that marketplace as strong with a stable rental market. Frequent relocations caused by government turnover impact that market and make it easier to rent a home if you choose to do that after living in it during your assignment! Other locations with large military populations such as Norfolk, San Antonio, Southern California and the Puget Sound area might also meet the criteria. But as Rich pointed out, are you ready to handle the worst case scenario in any location? Can you cover the mortgage after receiving the next set of PCS orders? Are you ready to leave the family in place till the sale/rental is complete? Have you looked at property management costs, if you do rent your home? What is your exit strategy? Do you plan to retire in the area and come back to the home later? All good questions to add to that decision point! Avoid the pitfalls, become smart about the area before buying!
The biggest pitfall of home ownership according to Rich: Inability to sell a home or find a renter that can cover the mortgage cost for you (don’t forget to subtract those property management and maintenance fees). Our personal experience after an overseas tour that included owning two homes, two college students and getting PCS orders was a nightmare and the fees from our property management team started really hurting! Be sure to check them out thoroughly and demand an accounting of their expenses in the contract! We found out that many of the projects that they said needed to be accomplished on our rental home were being done by a “brother in law’s” company! Hard to watch from overseas so the right company can be critical! Don’t be lured into buying by emotion or persuasive folks! Make a fully informed housing decision, do the research and enjoy your home!
When is the decision “absolutely must rent”? How long are you planning to be there is the decision point again! Less than two years! Rent! Rich reminded me, when you buy a home the fees are usually paid by the seller! So what looks like a good deal up front may not look so good two years later! Your sales price must now include that sales commission (6% usually), finance fees, title fees, inspection fees, repairs, upgrades to help market, etc. etc. and I do mean etcetera, etcetera! They just keep coming and after so many military moves it is nice to have purchased a home and watch the mortgage payments increasing equity instead of trying to just cover those costs of home ownership! What should renters consider? How much can you afford? Pick a place that meets your criteria for lifestyle, commuting distance, affordable, are utilities included and again Home Circle has a renting tab to help you decide!
Home Circle has a search tool, sources for rentals, can you be used with an iPhone and has a save function so you can go back to review houses of interest! Also, do you remember the USAA MoversAdvantage program? Some of those realtors will help you find a rental as a free service! Not a member of USAA? You can expect the Home Circle application to be more easily found outside their firewall by early next year according to Rich! Even though it is a new program, all the USAA employees have been trained on Home Circle and will be there to help with your questions!
Ready, Set, Move! Please let us know if you found this informative! We want your next PCS to be smooth and as stress free as possible! Thank you Rich for your service and support to the troops! We are blessed at this Season to have folks watching our backsides at home while our airmen, soldiers, sailors, marines and coasties are in combat!byColonel KonThursday, December 02, 2010
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