- April 23, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Seeking Advice on Real Estate Investment in Washington DC
Looking for any advice.. I’ll try to keep my story short with just the facts:
Prior E O-3. 70K in ROTH. 0 TSP because I’m an idiot. 160K saved away. No debt. No property. at 16 year mark. Owned a home, used VA loan, wife cheated, I left, she bought me out of the house so we refinanced and I’m off of the mortgage.
Moving to DC in July. Take home will be 10K a month. I would like to buy something there around the 500K range because I’m just tired of paying someone else’s mortgage by renting. I may or may not stay in DC so this is mainly an investment property but it’ll be home for 3 years with a decent chance of me staying longer if I do end up finding more work there or retiring and starting a new career in the area.
The housing market is brutal there (like a lot of places) so I’m leery of what a decent place will end up costing after a bidding war. Prepared to drop as much of that savings as I need to to drop the mortgage down a considerable amount. BAH there for an O-3E is around 3400.
Just looking for general advice or considerations I haven’t thought of. Thanks all.
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****** just grabbed a
$500k in the DC area won’t get you much. Living here now, it cheaper to rent than buy. Put the difference into a brokerage account and you will be better off.
General advice:
Being a landlord sucks. Everything is expensive and PMs are all horrible. Every time something little breaks that you would just do yourself costs $300 for a contractor.
With how much money you would sink in for a house in DC, it sounds like a horrible idea. I would just hold on to it to figure out what you want to do when you retire. That money gives you plenty of flexibility with where and what you want to do in retirement
500k doesn’t get you anything decent in DC unless you live far away from where most people work. Even then, people that move far away and looking for large places with space and those are going to be over 500k. Source: 41yr old O-3 renting here for last 3+ years.
Get a roommate and cheap apartment/condo. Luckily for you, BAH went up considerably for O-3
I hope that 160k is in a HYSA or Brokerage account making at least 5% on T-Bills. If not, do that right away! Definitely recommend starting to invest in TSP, 100% C fund is the way to go IMO. And I agree, you should buy a house. The VA loan is hard to beat, plus you can rent it when you move. I’ve tried to buy a house every time I PCS, it’s worked out great so far!
Don’t buy a place. Leverage your single status by renting with other military officers in the area if that’s a viable option. You may be able to save close to 70% of that BAH instead of spending it mostly on interest for the mortgage (plus taxes etc).
If you want to increase your nest egg that’s what I would do. Plus it’s good for social life.
Do not buy. You’re behind on retirement savings. You should put 30k away a year until retirement.
The transaction price will be 20k at least on that place. You’re not in a spot to spend 20k to start paying a mortgage on a place you will live in for 36 months.
Also assuming you do rent it out, rentals are renting below what your mortgage likely would be. Then factor in maintenence and/or property management. Then factor in now that rental money is income and you need to pay taxes on it. It is not a good idea.
Fully fund your TSP and Roth IRA. Get everything beyond a few months of emergency fund into the market (VTF/VSTAX, etc.)
Also life advice, don’t buy a house following a divorce. Take time and figure out what you want life to look like.
Are you planning to rent rooms in the house while you’re there? Do you want to be a landlord? What happens if property values stay level or decrease while you’re there?
O-3E without dependents BAH is meant to cover most of the rental cost of a 3 bedroom townhouse. If you rented a one or two bedroom apartment, you could free up some cash for investing without the risk of real estate.
Buying maybe right for you, maybe it isn’t. I never liked the “paying someone else’s mortgage” take. Sure, it is true as long as they have a mortgage, BUT, not having a mortgage gives you way for flexibility and it can be less expensive. It is definitely less of a headache. It is a mindset thing for me.
If you deploy and have a mortgage you can’t just “break a lease”. When you rent you don’t have to worry about buying new appliances when they break, paying for maintenance, paying for a new roof, homeowner’s insurance, etc.
When you have a mortgage all that guarantees is the minimum you’ll pay each month. With renting, it is the maximum you’ll pay each month for the most part. As long as you are pocketing a decent amount of the BAH while renting you’ll likely come out ahead if you invest the difference.
Across the U.S. rents are actually down year over year. Not sure if that is true in the DMV.
Sure, you miss out on the potential equity if the house were to appreciate, but put aside COVID and what that caused housing prices to do in such a short period of time. [Historically, you would get a better return investing in other assets](https://awealthofcommonsense.com/2024/01/what-is-the-historical-rate-of-return-on-housing/).
Not familiar with DC, but I have a condo in Philly, in a rapidly growing neighborhood. I rented it out for the past few years, but being a landlord is indeed a hassle. A huge chunk of my rental income was spent on maintenance issues. The appreciation was so very small that I’d be losing a good sum of money if I sell it at this point. The situation might get better later this year, but I don’t think it will be anywhere near “profitable.” I would’ve made more money putting it into A&P 500. And that way, I would’ve had a bigger liquid asset for other investment. AFAIK, DC only has it worse because at least Philly was cheap and is rapidly growing. DC has been expensive for a while. I’m off to BCT-OCS (from civilian) soon, and I can’t wait to get rid of this foot-binding asset and start anew.
You should still max your TSP. You’re missing out a free 5% matching. Free money.
Sure you don’t want to rent but that seems like that’s your only options seeing everyone else’s comments. You don’t want to buy with the intention of being a landlord.. easier said than done.
I would just rent something cheap with no roommates and max TSP and throw everything in an individual brokerage
Edit: get a prenup if you get married in the future
You could make out your tsp for whatever the year cap is tomorrow if that 160k is liquid
Max your Roth tsp and civilian Roth IRA as well moving forward. At least put the $160k minus one year of expenses consistently in some sort of mutual fund or investment. Dollar cost average, don’t buy all at once. And property in DC just sounds like a headache unless you’ve got a reliable property manager or something
You could buy something further out. Get more for your money. Look up house hacking . Or look to buy an apartment in Alexandria. I have a place in Stafford near Quantico. I’m going to rent out when I leave. 500k can get your a lot of house out there. Being a landlord is a hassle but it’s real income. The whole area is solid when it comes to dependable renters.
Set your TSP contributions to max out for this year. You are missing out on tax savings.
I own multiple houses here in DC and with current rates, it would be hard to turn it into an investment property with any sort of real return.
I’d put that cash into the market. Remember you can still max a Roth for 2023 and then max 2024.
The rest of that money is split between a S&P index and QQQ and you’ll make more money than an investment property anyways.
I think if you’re only staying 3 years, renting looks a lot more attractive IMO. Continue to save for a down payment, then buy once you figure out where you want to be for the rest of your life (hopefully somewhere cheaper than DC). Long distance landlording is typically not the play from what I’ve heard, though I confess I’ve never done it myself. The “paying someone else’s mortgage” take only works if you’re staying somewhere long enough to actually chunk the principal down significantly, you’re mostly paying interest the first couple years.