This article was written by Eddie Wills, from GubMints.com.
This is a friendly rebuttal to Nords’ recent post Don’t Buy a Home as you Leave Active Duty. The GubMints family has lived in the same North San Diego home we bought back in 2000, 4 months after leaving Active Duty. I’m here to show you that you CAN make it happen, but not without sacrifice.
Post Length: ~ 1750 Words
Bottom Line Up Front (BLUF): In hindsight, I would probably do it all over again, but I might have taken the VA up on its loan program for the free-refinance option later. Why?
- My family and I are happy with where we live. Happy Wife= Happy Life.
- Neighbors who have recently moved on to our block hate me- Mostly because my Mortgage and Property Taxes are about a third of what they are paying for the same home next door (If you’re from California, you already know all about this one- It’s called Proposition 13).
I’ll re-cap and re-butt Nords’ key points from his article one by one, and let the reader decide.
|NORDS’ POINT: Making the move- Why push so hard? …We’ve read dozens of panicked posts on forums and Facebook groups from veterans who’ve been turned down for a loan.
GubMints’ COUNTERPOINT: In some cases, buying could be smart. In our case, we rented for the first few months- but we were lucky to score the rental.
When I punched out back in the heydays of Y2K, the economy was red-hot. Junior Military Officer (JMO) Headhunters were actually placing officers in technology companies in the San Diego Area (!). That being said, I still chose to arrange my first civilian job on my own- A construction contracting gig.
Finding a rental in that market was NOT easy. I was new to the area, new to a job (with 1099 income), plus we had 2 cats, 1 dog, and a 1-year-old running amok. Apartment complexes didn’t want to touch us- Finally, a family friend had a vacancy in one of his condos and let us move in. The rental condo we moved into was rather dated and dumpy (it was what is known as a condo conversion, where an apartment complex sells off all the individual units as condos in a massive Equity cash grab).
In the end, our initial rental was all a blessing. The contracting gig fizzled after 2 months and I was unemployed for a few weeks. Fortunately, the rental was in Central San Diego, which gave me the option to commute to just about any job in the county within a reasonable time. In spite of the fact that our rental shared a wall with a drug dealer (a real ‘duh!’ moment in hindsight when we were informed of this during move-out), the place served our needs. It may have been impossible for us to purchase a house with 3 pets, a baby, and an expired 1099 pay stub unless we were Cash buyers.
After the construction gig fizzled, a JMO headhunter quickly landed me a job in North San Diego, where we bought what would become our ‘Forever’ Home- A new construction house 3 stoplights away from the new Job. Everything was happening Exactly according to my Plans.
|NORDS’ POINT: The myth of the forever home… It turns out that civilians don’t move as much as military families, but they still move a lot.
The reality is that over 11% of Americans are still moving every year … GubMints’ COUNTERPOINT: Totally agree with you on this one Nords.
We’ve been in our house for almost 18 years (since 2000), but our household is the exception to the Rule. Most of the homes on the block have turned over 2-4 times during our ownership tenure. For example, the house on our left is on its 3rd owner (and will be on its 4th this summer). The house on our right is on its 3rd owner (likely 4th before the end of this year). On our block of 50 homes, there are only a handful of us ‘Old Guard’ (O.G.) owners still on the block who purchased our homes during new construction.
Why is this so?
First, The Forever Home is elusive because of the Job Search issue (my estimate: 50% Probability in a 30-year Mortgage).
|NORDS’ POINT: The job search….one of the reasons my spouse and I pursued financial independence so hard is because neither of us wanted a bridge career after the military.
The hardest part of the job search is flexibility, and that sets up homebuyers for failure. Ideally, you’d go where the job is. GubMints’ COUNTERPOINT: Nords, you’re Spot-on again.
As a youth, I moved around quite a bit- Seven (7) times before high school. Dad was NOT Active Duty Military – He worked accounting for a big company that would later become Honeywell. Any time Dad was offered a promotion, there was always a catch – He had to move his family. Dad got another promotion opportunity while I was in High School, but by then we had all had enough. His career moved sideways for the better part of 7 years following that ‘non-move’- But his family stayed together.
HARD KNOCKS LESSON LEARNED: It doesn’t matter if you are military or civilian, in either case, upward mobility often equates to geographic mobility.
Following my youth experience, plus my 4 PCS moves in 7 years with the Navy, I made up my mind that this would not happen to me and the Gubmints family once I Punched Out. I made it a point that I would only work for companies Headquartered in San Diego, or the government (or its government contractors) in San Diego.
So how did that work out for me? I’m still in the same house, but on my 4th career since buying the house. The jobs have ranged in tenure from 4 weeks to 9 years, and the commutes have ranged from 3 stoplights to 3 hours round-trip. I’ve got no regrets from any of the employers I’ve worked for, and I’ve always enjoyed the camaraderie of the people I’ve had the opportunity to work with.
..but it has come with sacrifice. There’s an infamous ‘Sunshine Tax’ or ‘San Diego Discount’ on wages in the area, plus I have worked a few jobs that amounted to a 50% travel cadence.
Furthermore, my lack of interest in opportunities over the geographical horizon may have stunted my career growth. I’m not alone – Look at the recent survey of 645 former Navy Nukes recently performed by Lucas Group, and you’ll see that 50 percent of Nukes who punched out are making less than their Active Navy colleagues.
The tradeoff for my ‘slow growth’ on the wage scale is that I’m still in the same house, and my oldest son has been in the same school district for 18 years. About half of my former neighbors on the block have moved out for job relocation- And job relocation can be used for any job-related circumstance, be it promotion, firing, RIF, company shuts down, etc.
Second, the Forever Home is elusive because of ‘Family Issues’ (i.e. Divorce) (~25% Probability in a 30-year Mortgage).
I’m in the demographic now where married couples are dropping like flies. And during the Divorce, the house usually gets liquidated as a part of the Settlement. I won’t bore you with Family Law statistics, but I certainly empathize with why these things happen. When you get to mid-career/middle age, a whole bunch of factors starts to stack up against your Family Life:
- (40-60 hrs/ week) You’re expected to take on more responsibility at work in line with your salary increases over the years.
- (1-30 hrs/ week) Your Aging Parents are in deteriorating health. If you’re lucky, they’ve pre-arranged everything with their estate and health directives. If they haven’t, you or your spouse will have the equivalent of a full-time job taking care of Mom or Dad’s affairs and their well-being when one of them has a fall/stroke/heart attack, emergency major surgery, etc.
- (5-20 hrs/week) You’ve got school-aged kids. Watching them grow is rewarding, but it takes a LOT of your time.
- (0-10 hrs/week) And oh yeah, if you’re lucky you still have a Spouse, you need to commit time to the relationship. If any one of the 3 bullets above has a ‘surge’ in activity, your time spent with your Spouse- And Your Relationship- Will suffer.
Third, the Forever Home is elusive, as no structure meets all of your needs over life’s stages (25% Probability in a 30-year Mortgage, near 100% Probability over 40 years).
It’s highly unlikely that 1 home will meet all of your needs during the life stages through Early Marriage, School-Age kids, Empty Nest, and Golden Years. Ex:
- A downtown condo is great for your social life when you’re DINKs, but you’ll be bursting at the seams with a family of 5 in a condo.
- A suburban tract home is great for kids, but it will be too big a mortgage to deal with when you’re young. It will also be Too Much House when you have an Empty Nest.
- A small condo will be great when you have an Empty Nest, but you’ll want a single-story home in your Golden Years.
|NORDS’ Other POINT: The VA loan financing fee is pricey.
GubMints’ COUNTERPOINT: VA Funding Fees are a bit pricey, but can be worth it.
The Gubmints Family never did a VA Loan. We have refinanced 5 times(!) since 2000, mostly for interest rate drops, but sometimes to do a cash-out.
Looking back on this, the option to drop your mortgage rate for free under the VA IRRRL program any time market interest rates drop would have saved us thousands and thousands in fees over the years- More than likely worth the up-front fees that would have accompanied using a VA loan on the original purchase vs an 80/20 Conventional Mortgage. I’m envious of fellow vets who have used the IRRRL program do drop their mortgage rate for free.
So in summary,
…the GubMints family:
- Has owned the same home for 18 years that we bought within 4 months of departing Active Duty.
- We love the house, love our neighbors, love the schools, and love the (present) commute.
But it took some sacrifice- And a lot of luck- to get where we are today. That being said, I have no idea if we will be here another 18 months, another 18 years, or Forever. We’re going to let life’s stages (and Proposition 13) decide!
It’s not likely you’ll find your ‘Forever’ Home immediately after leaving the Military. Career Changes, Life Changes, and Growing/Shrinking family needs will morph what your ‘ideal’ home looks like over time. That being said, if you have a static time horizon of 5 years or more in front of you, the economics of Home Purchase/Mortgage can work in your favor versus renting the same house.
I wanted to commend this site for such a great topic between Eddie and Doug. I discovered both blogs independently a few years back and enjoy the juxtaposition on such a popular goal for those on active duty. Please keep it up.
Thanks, Dermot! Eddie has a lot of wisdom on his site (and from his experience) and I enjoy keeping in touch. He contacted me to chime in on the home debate, and I think the discussion needs opinions from all sides.
This topic sort of dovetails with the BRS vs Legacy/Cliff vesting military retirement system. If, if you determine to exit the Navy/military prior to the old golden 20, due to family, career, or even meeting some FI metric you may have met, would you buy vs. rent. Knowing full well under the old legacy system you could never outlive your paycheck or have some form of guaranteed monthly cash flow. And yes, as the article does point out, there are career and vocational employment patterns where your ‘civilian’ pay/benefits will not match or exceed that of active duty. It took me 4 years post active duty retirement to match my pre-retiement Navy active duty income of 0-5 over 22. And I was in Health Care. Your results will vary. I bought my current home in Pa prior to my last tour in DC and commuted every weekend Philly-DC those last 3 years. House is paid for now, and we all need to live somewhere and have a roof over your head. I never saw the house as either 1. an investment 2. an ATM 3. A factor in my net worth. Works for me.
Houses in San Diego used to be so much cheaper 20 years ago. Nowadays it’s like “holy cow, I doubt most young people can afford that”.
Great point- counterpoint story! I love that! I’m definitely still on the rent side of rent vs. own.
Eddie and I are both submarine vets, so our shared background offers a balanced perspective on this perpetual debate.
I don’t know whether we’ll change anyone’s minds, but we’ll definitely make sure that prospective homeowners understand their risks.
This is a difficult subject and I’m in the middle of it now. I left my “bridge career” in the Washington DC area and moved to northern Michigan where I built my own house thinking I would live there forever and not move again. Well, I’m writing this from overseas where I took a term position with the civil service.
The pros–Since I built the house myself and did much of the work myself, I was able to keep labor costs way down. I planned it out meticulously and found the very best materials at the best possible prices. Since I live near Canada, I used arbitrage through a very favorable US-Canada exchange rate to buy everything from lumber to insulation to fixtures at a steep discount. On most other items, I used my 10% military discount at Lowes or Home Depot. The discounts enjoyed during this process on labor and materials are like dividends that keep paying me over and over through the years. To illustrate this point, consider the following: I insulated my entire house myself. Its about 3300 sq ft and cost me about $2500 in new insulation. I also had a bid for spray foam that was $21K. The $17500 I saved on the insulation upfront in labor and materials, then compounds itself over the duration of the mortgage.so for roughly the same energy efficiency, I am saving $75,000 in interest payments based on just one component of the house. Now consider multiplying this over many different parts of the house and the savings begin to skyrocket ( I could write a novel on how I saved money doing this over the almost 3 years it took me to finish!). Even though my situation is unique and I’m going back to my house in 2-3 years (I’m not renting it out and my parents are keeping an eye on it), the costs of waiting to build could be substantially higher due to higher material costs, higher interest rates, higher labor wage costs, higher tarriffs etc., higher permitting fees and in my case a change in the exchange rate.
The (possible) cons, while I take this other employment, I have to pay for upkeep and utilities on this house, storms could damage the house while I’m gone, frozen pipes or flooding, theft etc., I continue to pay for my relatively small mortgage so it is costing me funds that could have otherwise been invested, but my equity (both financial and sweat) is substantial and its still a primary residence so the tax benefits still exist I think. Also, I’m a DV so I don’t currently pay property tax
In the end, a lot of the intangibles made the decision for me. No matter where we move, my family has a place to call home that we can return to whenever we want. I have many relatives that live nearby and a lot of family history in this area Also, the skills developed building the house in the first place continue to pay for themselves over a lifetime (I hope).
Thanks, Dave, great recap!