Rent or Buy? 9 Potential Downsides of Home Ownership

By Carol Church

It’s a thrilling feeling to be handed the keys to a home you’ve just bought. A house can also be a great investment that will build wealth for generations to come. However, as most of us know, buying a home also has risks and downsides–perhaps especially so for active duty military, who may be relocating every few years. Still, it can be tempting for service members to believe that buying is always cheaper or more financially sound than renting.

Obtained from Pixabay.com https://pixabay.com/en/new-home-for-sale-construction-1633889/

So, what might service members want to keep in mind when making this decision, especially when the temptation of homeownership is calling? Here are nine reasons why service members may want to consider renting instead of buying, especially when on active duty:

  • You may not be able to live where you want.

Want to live in the best school system, or close to base? Enjoy a walkable area close to shops, or like living in downtown? It may be financially impossible to buy in these desirable areas, or houses may come up for sale only rarely, with major bidding wars. Renting is likely to be far more feasible.

  • You’re on the hook for maintenance and repair.

Once you buy a home, every clogged toilet, broken dishwasher, and leaky roof is on you. It’s not that potential homeowners don’t know this—but have they really thought about the costs? Experts advise homeowners to expect to spend from 1 to 4 percent of a home’s value per year on repairs and maintenance, but it can be much more at times. And if you’re on a tight turnaround time to sell the home again, you may not recoup those costs.

  • There isn’t always a tax break.

Prospective homeowners are often excited by the idea of getting a tax deduction for mortgage interest. However, to qualify, you have to have a rather sizable mortgage, and you must itemize deductions. Even then, it’s the wealthiest people with the most expensive houses who typically do best here. (Families earning more than $100,000 a year receive the bulk of these tax benefits.)

  • Being a landlord is a drag—and expensive.

If you’ve had to move on but your old house has not yet sold, you may end up needing to rent it out in order to afford your mortgage payment. This is either a major investment of your time and skills, or a major investment of your money (to hire a property manager)…and sometimes both! Finding tenants, checking their qualifications, and coping with repairs, complaints, and possible nonpayment can be a real nightmare. And depending on what the housing market is doing, you may still lose money.

  • You may be in trouble if your credit is poor.

Renters with poor credit may have trouble finding a landowner who’s willing to take a risk on them, but once that’s out of the way, the problem is over. But buyers with poor credit may have to accept a higher interest rate, meaning that they continue to pay for their mistakes, month after month.

  • Houses eat free time.

Being a homeowner can mean spending one’s free time at the hardware store or on fixing, building, mowing, and raking. For some this is fun, but for busy military families without a lot of regular free time, or with one member deployed, it can be tough. Maybe it would be nice to let someone else handle trimming the hedges?

  • The additional costs are nothing to sneeze at.

Even with a no-down-payment VA loan without private mortgage insurance, service members still need to have cash on hand for funding fees and closing costs. They’ll also need to pay property taxes and home insurance every year, and these costs may be substantial (and can rise unexpectedly).

  • You’re taking a risk, and tying up your money.

Many look at home ownership as a wise financial investment, and it definitely can be–but of course, this isn’t always the case. While the housing market has recovered substantially and continues to rebound, millions of American homeowners are still underwater, owing more than their home is worth. Though this may eventually work out for those who can stay in the home and regain equity, it can be a disaster for those who need to move on. Furthermore, consider what you could have been doing with the money that you put into that home purchase (fees, down payment, maintenance, insurance, monthly payment, etc.) Could it have been invested in a high-yield vehicle that would also have been little to no trouble to maintain, with lower risk?

  • You may be rushing into things.

It can be overwhelming to try to buy the right home in a new and unknown city in a short period of time, and sometimes the choice you make is not the financially or practically sound one. This can be a problem for any homebuyer who is relocating, but it may feel especially acute for military families who have a lot to deal with in a short time when PCSing. With renting, the risks are greatly reduced—you won’t be stuck with a “lemon” that you’ll have to unload later.

With all this said, there is, of course, a time and a place to buy a new home. When that time arrives, there are many great resources out there to help. Search MFLN for the “buying a home” tag to read more about the ins and outs of buying a home when in the military.

 

 

Military Vacation Discounts and Deals

By Carol Church

Auremar/Photospin

Being a member of the military can be extremely challenging at times, but fortunately, it also has its perks and privileges. These privileges often come to the fore when it’s time for service members to enjoy some time off from their hard work. Many private companies have taken it upon themselves to offer valuable discounts and savings to service members, while government entities, nonprofits, and military itself also offer opportunities and savings. Following are some ways that service members can save money and even enjoy free benefits while also enjoying time off and time with their families.

  • Try a free military family retreat.

The National Military Family Association offers FREE family retreats for service members and their families in beautiful locations. Families will spend time building memories, enjoying the outdoors, and building communication skills.

  • Enjoy free event tickets with Vet Tix.

This organization donates tickets to music, sports, and family events to veterans and their families. There may be a small fee for shipping.

America’s spectacular national park system offers a free annual pass to current U.S. military members and dependents in the Army, Navy, Air Force, Marines, Coast Guard, Reserve, and National Guard. The pass gets service members into national parks along with Fish and Wildlife Service and Forest Service sites. It’s worth looking into the camping and lodging options at these sites—they offer excellent value, and not all are rustic. However, they fill up early.

  • Enjoy Disney at a discount.

Disneyworld and Disneyland have been providing significant discounts to members of the military for some years now, and 2017 is no exception. General military ticket discounts can be viewed here, or those considering a longer stay can take advantage of the Armed Forces Salute prices available here. Be aware that there are blackout dates and restrictions.

  • Get free tickets to theme parks.

The Waves of Honor program provides active duty military with up to 4 free tickets a year to Busch Gardens, Sesame Place, and SeaWorld attractions. Legoland Florida also offers free admission to service members.

The five AFRCs (located in Orlando, Honolulu, Tokyo, Korea, and Germany) offer comfortable and even luxurious accommodations in compelling locations. Rates are based on pay grade and rank. The Orlando resort is likely to offer a more budget-friendly option than most Disney hotels, but service members should make sure to compare.

  • Try out a DOD campsite or RV site

The military operates a network of RV sites and campsites across the nation which offer an inexpensive option for those with this interest.

  • Look into Space-A flights and on-base lodging.

These options may not be the most convenient or comfortable, and taking advantage of them (especially the flights) requires time, planning, and know-how, as well willingness to be flexible and to plan well in advance. However, they can save families a significant amount of money (Space-A flights are typically close to free!) and typically the level of service is very acceptable. To learn more, visit these pages:

Department of Defense Lodging

SpaceA.net

  • Check out the many other discounts available.

While the above are some of the more significant and popular freebies and discounts, there are many other military discounts available on travel, hotels, and lodging, and of course, they change often. Here are some sites compiling travel and recreation discounts available to servicemembers:

Military.com Travel

Jommygosh: 48 Military Travel Discounts and Free Services

Vacation Budgeting Tips

  • Start saving ahead of time in a dedicated fund. For many families, it is relatively frictionless to set aside a small sum of money every month. One possibility to consider is a separate savings fund, so that the money is clearly designated and hands-off. Though the interest rate may not be high, the psychological effect can be important.
  • One of the biggest expenses for many vacations may be just getting there. Check out this Fly or Drive calculator to make that big choice, and don’t rule out taking the train; service members receive a 10% discount from Amtrak. If flying, be sure to compare ticket prices on multiple airfare price aggregators such as Kayak.com, Airfarewatchdog, and Google Flights. Try the flexible date option for best results.
  • Choose a hotel with free breakfast, rent a house on VRBO or Airbnb, or rent a hotel room with a kitchenette to save on food costs.
  • Visit sites like Groupon and Living Social ahead of time and look for deals on tourist attractions in the arae of interest.
  • Just as with other coupons, families should remember not to purchase any of these options simply “because” they are discounted. Instead, they should consider whether or not they are the right choice for their family, and whether the price point is what they wanted to spend (even if it’s a “great deal”).
  • When in doubt, always ask if there is a military discount! It may exist, but not be obvious, mentioned or advertised.