Anyone senior guys or responsible folks here that bought multiple houses due to PCS? What are the pros and cons?
Anyone senior guys or responsible folks here that bought multiple houses due to PCS? What are the pros and cons?
byu/billhussle87 inMilitaryFinance
Posted by billhussle87
4 Comments
Pros: Potential for a more cushy retirement and/or generational wealth.
Cons: Upkeep, potential complete loss of investment, getting sued, no monthly cash flow, keeping up with investments while you live OCONUS, etc.
I’ve heard stories of people “buying a home at each duty station” and I honestly do not know how one is able to do that, especially as a junior service member at a first duty station.
I just bought my first home at my third duty station.
I have 3 homes with a combined mortgage/HOA of 7k every month. The tenants pay every month but if you have a bad one you pay the mortgage. Every summer when tenants switch out I have to pay 7k in commission to the property manager. Every month a house doesn’t have a tenant you are on the hook for the mortgage. This summer i had $2k in repair bills plus the PM commission, i was out 10k. Summers are usually expensive.
As for the pros I have 700k in equity from appreciation, all purchased with zero or very little down. If i just hold onto it ill have severaĺ million in 20 years when the homes are paid off, plus officer pension.
But interest rates are high now and the numbers won’t work out unless you put down several hundred thousand. And managing tenants/repairs is a lot of stress even with property managers. I have the cash flow to cover 3 homes because im an O, but i would be very careful if I was enlisted and a single income family. Just few months of vacancies and repairs could easily cost you a lot
Pros are diversification geographically to lesson risk for natural disasters, snowball effect as you pay off a property to move to the next yielding long-term cash flow, less short-term volatility in values, and building long term wealth. You’re also putting BAH into an equity vs rent.
Cons are that you may see low appreciation years that are below stock market returns, overly aggressive HOAs, bad tenants (the type that don’t abide by HOA rules and leave damage just slightly beyond the security deposit), really bad malicious tenants (the type that you have to evict and pour cement down your toilets as they leave), illiquid assets, filing taxes in multiple states, dealing with maintenance issues personally or management companies that now have grown extremely large and bureaucratic through acquisitions, and having to juggle mortgages with your consistent moving and needing to ensure you have enough cash flow with tenants for your own house. I’d add insurance/liability concerns.
For reference, a few tips:
– either LLC or umbrella insurance. If you go above 2 rentals, I recommend the LLC route for liability. 2 or under you can get an umbrella insurance policy up to 5 mil to supplement each property’s insurance. Usually 2-3 mil will be enough.
– property management companies – they are becoming conglomerates today and more painful to work with. Do find a good one and don’t be afraid to shop around/fire a bad one.
– cash on hand – I kept a 50k HYSA with two rentals and a primary home, $0 mortgages on the rentals. I wanted to be able to handle two major repairs of $15k each at any moment with zero stress. I just went through a 10k repair on our last rental now – insurance covered only $2500 due to the type of damage and types of repairs.
– as I said it last rental, if it’s causing too much stress, don’t be afraid to sell. We sold a rental and our primary home. Being down to one is better being overseas for us. But this is a personal decision.
– do the numbers at each duty station. Buying will not make sense sometimes… And that’s ok. Rent in those times and put away cash for the next opportunity.