26 year old O-2. Soon promoting to O-3 later this year. Respectfully requesting advice from senior military folks out there. Been investing in Roth TSP and my IRA since I started my career. Been contributing 15-35% in my Roth TSP, and maxing out my IRA. Roth TSP sits at around 66k, and IRA sits around 37k. I also have a separate brokerage with Vanguard, which has 85k sitting in the money market account.
I’ve been looking to invest my capital from vanguard into real estate, and renting out the home to military folks. Been researching areas that have median home values around 200-300k. It’s what I could afford even if I have vacancy months. Talked with property managers to research rental values for those homes and ultimately came to the conclusion that i would be breaking even/negative on average with 20% down. Hard to cash flow with 7.25 interest rates, property taxes, home insurance, etc.
Am I dumb to even think in investing in real estate? Should I just stick with the S&P 500? Thanks in advance.
Posted by Eragonwerty
4 Comments
I wouldn’t bother right now. I rented my entire career. Focused on investments. I had no desire to be a long distance landlord. As an attorney I see enough financial stupidity. I don’t want someone like that on my lease. We just bought our “forever home” as I retired a few weeks ago. But it looks like you’re way ahead so keep the foot on the pedal and shovel money into investments. I did. And I have no regrets about not getting into real estate earlier.
Don’t worry about buying a home just to rent. That requires a lot of work. And why is 85k sitting in a vanguard money market fund? Invest it. Keep maxing your IRA and contribute as much as you comfortably can to your TSP. I didn’t max my TSP until I just about pinned O4.
Do you actually want to be a landlord?
You mentioned hard to cash flow. Which means you done some math, which is good. Trust that math. Now is not a great time to be a new landlord.
I’d put that $85,000 to work in VTI or VTSAX.
Don’t believe the mortgage brokers and real estate agents that sell the idea you need real estate to become wealthy. Plenty of military millionaires that rent for a long time and never buy on active duty.
As an officer you can easily become a millionaire just through TSP, IRA, and brokerage investments in low cost, automatic, diversified, simple (LADS) index fund investing.
Don’t complicate or add stress to your life unless you are really set on building the real estate empire. But if the asset doesn’t cash flow, why are you paying your renter’s rent for them?
Same boat as you brother, I plan on buying land, and hopefully getting an oconus assignment, after tccc