There are a ton of benefits that come along with a military commitment. One of those is the VA Loan, which allows you to purchase a home with no money down. That’s right, instead of the conventional 20% down payment, or the 3-5% FHA down payment, the VA Loan allows you to buy the home of your dreams with zero dollars out of pocket.
Now anyone who has experience with the military knows that its members travel often. If they aren’t traveling for a deployment then it could be for training or for a Permanent Change of Station (PCS). PCS simply means that you will have to move you and your family from one military base to another, which typically means to another state entirely. This is where the first mistake usually occurs.
1. Find an Honest Realtor
Finding a good, honest realtor may be the most important of all the steps in searching for a home. A good realtor will ask you what it is that you want in a home, know their market, and fight to get you the best deal. It’s no secret that real estate agents work off of commissions and that there is a ton of competition in some markets. So, it is important to find one with solid credentials.
How do you find the right one? Start by asking any real estate agent that you know. Then follow it up with searching online via Yelp, Facebook posts, google top real estate agents in your area, and ask around. You can ask friends and co-workers who have recently purchased a home, ask property managers who they have worked with in the past, and you can ask bank lenders who they do business with the most. And once you have identified a few prospects, go and speak with them. Get to know them and see what they are all about. The sky is the limit on ways you can find out the right real estate agent for you.
2. Don’t Buy Your Dream Home
When you think of buying a home, you think of the home of your dreams. Large fenced-in yard, enough bedrooms for a growing family, and a garage large enough to fit a home gym in. This move-in ready home will be priced at the top of the market. You will be paying a premium to receive everything you want.
When you pay with the VA Loan, you are getting this home with ZERO EQUITY. This may not sound like a big deal if you aren’t aware of what equity is.
Equity = Value of the Home – Remaining Loan Amount
So if you sold the home, the equity would be a portion of your profit. When you finance a home mortgage you are more than likely going to get a 30 year amortized fixed-rate mortgage. Every month you will pay a mortgage that is divided up between interest and principal. It will be transparent to you, but the majority of that payment will be spent on interest. Meaning you won’t see a decrease in the principle until a few years have passed.
When it becomes time to PCS, many military members may find themselves paying out of pocket to sell their homes. Instead, if purchased right, you should be receiving money in your pocket when you sell.
The moral of the story is to buy a cheaper home when you are early off in your career and save the home of your dreams for when you have identified where you want to settle down later in life. Maybe you could purchase a foreclosure or a fixer upper at first. That way there is a way for you to add value to the home before it is time to sell.
3. Don’t Be Afraid to Rent Your Home
Instead of selling your home when it’s time to move, why not rent it? This can be your first rental property in your portfolio of rentals. Military bases have been concreted into these locations for decades and always have a large quantity of semi-permanent people looking for housing. If you purchased the home in a desirable area and you take care of your home, you will more than likely experience little to no vacancy in the property.
If you’re nervous about trying to manage the property, hire a property manager. They will be able to market the property, screen the tenant, collect the rent, and coordinate the maintenance all on your behalf. Be sure to do your due diligence in finding a good property management company and you could expect to pay roughly 10% of the monthly rent for their services. However, being in the military and never in a stable position, this may be the best option for you.
Start doing your research and set yourself up for success. Learn to leverage the benefits that the military gives you.
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