Hoping I could get some advice with my current situation. I'm currently looking at a PCS to a MCOL/LCOL area later this year, and I'm debating my housing options. I'm expecting a follow on PCS towards the end of 2025/early 2026 to a HCOL/VHCOL area (Likely the San Diego area). Throughout my career so far, I've only ever lived in base housing or rented in town, and I've always had a roommate or two. I am single, with that likely changing in the next year or so. Financially, I'm sound, with a high 30-low 40% savings rate, mostly in my TSP and IRA, solid emergency fund, and no debts.
Long term, I would like to eventually own the house I live in, for a variety of personal/emotional factors. Knowing that saving a down payment for a HCOL area would be difficult and would sacrifice a large amount or return by keeping that much in cash, I was considering purchasing a house in the MCOL area with the VA loan. My reasoning is that while living there, I would have time for some small-medium sized renovation projects, I would live there with roommates, and after about a year or so, I would move out with plans to rent it out while renting myself at my follow on duty station. Even if I don't have positive cash flow, I still think that as long as I could limit my burden to a few hundred dollars a month, I would be happy paying that, knowing that I would be building equity somewhere, and could eventually sell that house to help purchase a future home that I would actually want to live in.
I've done a fair amount of reading/listening to podcasts on the subject, so I know the usual risks, and I know that being a long-distance landlord is going to be a challenge in itself, but besides the usual risks and challenges, what issues do you see with this as a strategy? My current alternative option is to simply continue renting, dump my over 3 year TIS pay raise into my TSP (Likely would allow me to max out next year), and start investing in taxable after that. Does anyone have any tools they would use to compare how these options would work out financially?
Strategy if I want to buy a house in the long term?
byu/rock-and-sea inMilitaryFinance
Posted by rock-and-sea
1 Comment
So rather than keep cash growing at 4-5% per year, your plan is to buy a property with negative cash flow and no guaranteed appreciation?
If you want to buy a house that’s great. I don’t see how buying a different house in a different market is helping your long term plan of owning in a HCOL area.
You mentioned the VA loan. That can be useful. Saving a down payment for a few years in a high yield savings account (HYSA) or a certificate of deposit (CD) is a way to guarantee the value of your savings and earn a small return.
House equity isn’t magic. It’s the market value of the house minus the mortgage. You can’t unlock the equity without refinancing, HELOC, or selling the house.
Run the numbers, but I don’t see how losing hundreds of dollars a month on a negative cash flow property is going to help you save to buy another property.