Updated 3/20/18. Originally published 8/5/15.
- Either buying or renting may make sense depending on your circumstances
- Don’t wait until leaving the Army to consider buying a home
- Talking with a Realtor can give you a great insight into the options and what is right for your unique situation
Still deciding whether to rent or buy?
Look no further!
Fort Hood is overwhelmingly renters. According to the US Census, 1/3 of Americans are renters. That ratio is flipped in the Fort Hood area – 2/3 of Killeen residents are renters.
The high concentration of renters is clearly due to the transient nature of military serivce. The Fort Hood area is overwhelmingly military personnel (54% of home buyer loans are VA loans, for example). Military members are more likely to rent than buy (more on that below).
But some would likely do well to consider buying.
Advantages of Buying
Pay rent for 30 years, you’re still renting. Pay a mortgage for 30 years, you own a house.
More and Better Home Options
Even good landlords don’t buy the expensive carpet padding. Homes for sale can be much higher quality than rental alternatives.
Or the opposite! You can find a fixer-upper bargain foreclosure deal that might cheaper than rent. Also, good luck finding a rental outside the city limits with some land and space, if that’s your cup of tea.
No Property Manager/Landlord
Buying a home frees you from following the landlord’s rules. Get whatever dog you like! Have guests over whenever and for how long you want. Plant a Dogwood or build a pergola if you want (city/HOA regulations allowing). Also, Killeen area property managers are hit or miss on quality (See here, here and here.)
Mortgage interest is tax deductible, usually several $1000s a year from your taxes.
You won’t get kicked out after 12 months because the landlord got “PCSed” back to Ft. Hood and wants to move back in.
I’ve worked with one buyer who had been kicked out of their home not once but twice, just because the previous owner either was moving back or wanted to sell. Hate moving? Consider buying.
Buying allows you to pursue this investing technique. Buy a home with great owner occupant financing terms and turn it into an awesome rental when you move in a few years (or buy a fourplex/duplex and start collecting rent today).
Less Money Up Front
So, this benefit depends on your loan type. It is quite possible, though, with the VA or USDA loan that the out of pocket costs of buying a home is less than “first month’s rent + security deposit” of moving into a home.
Advantages of Renting
Your rent is your rent, and, unless you broke it, major repairs are going to be on the owner, not you.
Gotta scoot? Put in your 30-day notice and you’re gone. Owners have to rent out their home, which could take months, or sell it, which could take even longer.
Bad Credit Options
Property managers and landlords care about credit, too. But there are more options than draconian, rule-bound home lenders for those with marginal credit scores.
Not responsible for all the costs
Normal wear and tear – that’s the owner’s problem, not yours.
Even if you pay cash, the quickest you could buy a home would be a week. Usually, it will take 6 weeks with a lender. Renters often can sign the lease and move in the next day.
Less Money Up Front
So, if you are not using the VA or USDA loan, you are likely going to have a downpayment (though certain buyers are eligible for downpayment assistance). That is 3.5% or 5% of the sales price due at closing, which is probably more than the starting cash to get set up in a rental.
Use the Calculator
For those analytical personalities, Freddie Mac has created a nifty calculator to help with the rent v. buy decision. Freddie Mac is the Government Sponsored Enterprise (GSE) along with sister company Fannie Mae that comprises the majority of the mortgage secondary market (where your lenders group and sell your loans to debt investors). But the secondary mortgage market is another blog topic for later.
Renting (or living on post) is a popular choice for the military, even when they would otherwise qualify for a perfectly good loan. And it is understandable why – if you expect to live in a home only a few years, chances are that you won’t break even trying to sell your home when you move.
But I would still recommend to my military friends to consider buying a home for a few reasons. For example, I bought a home when I was in the military every time I PCSed or redeployed – 5 homes total in 5 years. I used my VA loan twice (you can do that!) and FHA loan 3 times. I was 22 when I bought my first home, and I have kept it as a rental. Before I am 60 years old, I will own 5 properties free and clear, not including any others I buy before then. That is an awesome little rental portfolio for my retirement if done properly.
I see the alternative too often – Sergeants Major, Field Grades and CW5s who always rented or lived on post, retiring after 20-30 years, and don’t own a single piece of real estate. They think that is the time to use their VA loan, initiating a new financial liability that will take 15 or 30 years to pay off.
Please strongly consider buying in Texas if you:
- haven’t used the VA loan before (you can use it twice)
- have a 100% VA disability (you are property tax exempt and get great rates)
I’ve written several other articles on how to wisely budget your home purchase in the Fort Hood area. Please read them if you are considering buying in our area. I hope they are helpful!
Buying is not the right answer for everyone. But don’t be afraid to buy. There are countless resources to help you make smart decisions. This website is one where I write regularly on how to buy intelligently in the Fort Hood market. I also recommend checking out my articles on buying in the area, or exploring my the local neighborhoods!
If you are moving to the area, reach out to me! I can help decide and find the right home for you!