We have all been in that apartment. You know, the bachelor pad that has empty pizza boxes and smells like stale beer. A DVD collection of every sci-fi thriller and war movie is stacked up on the DVD tower and a tipped over seven eleven styrofoam cup is on the sticky end table next to the black pleather couch. The 86" tv takes up the entire wall and it is surrounded by a high dollar Bose surround system that allows the upstairs neighbors to feel the vibration from every explosion in The Hurt Locker. It's great! Isn't it?!
Let's fast forward, Joe meets Jane. He kinda thinks he likes her and one day he is compelled to clean up his pad a bit. Jane comes over. Jane likes Joe and they decide they should move in together. Suddenly Joe's bathroom sink is covered with fifty shades of grey eyeshadow and every scent of Bath and Body Works body sprays. Jane hangs up her sunglass organizer next to Joe's hat rack. They realize that they were meant to be and decide to have a shotgun wedding before deployment. The lease is over and it is time to make a decision on where to move next.....what to do?
Well Jane and Joe certainly have a big decision to make and Jane suggest they buy a home. After all, her BFF just bought a house and it sounds really cool. Joe doesn't understand how to qualify or if they even can and really what difference does it make? A place to live is a place to live and he doesn't even know what his next assignment will be, so they may as well play it safe and continue renting.....wrong!
What difference does it make? It makes ALL the difference. On average, home owners are worth 40x....yes that is right....forty times what renters are worth.
Homeownership is the single most important factor when determining your net worth and it the wisest choice for your financial future. Owning a home is basically a forced savings. Every time you pay on your mortgage, you are paying down your debt while your asset is appreciating.
I had a client that wrote a contract on a $280000 new construction near Fort Carson that was not scheduled to be completed for six months. As you have seen in our previous blogs, the average increase in homes values across the nation has been 18%. That is a huge number! By the time her home was completed, it was already worth $310000! She and her husband moved into their brand new home with an effective savings of $30000! You can't tell me that a couple, just starting out, could have ever put $30000 in savings in six months, but there they were. Golden.
Another client was looking to PCS into Buckley. They were on the fence whether or not to buy or rent. Of course they heard that buying was better but they did not know if they would qualify and they worried that since they would only be at Buckley for two years, it would be a waste of time and money to pursue homeownership. Fortunately for them, they reached out to us here at VHN and we helped them understand the best course of action. They qualified for a $400000 home. If they purchased that home and lived in it for two years, they could expect to see that home be worth around $450000 to $470000 in two years with the current rate of growth in the area. Even after paying real estate fees, and assuming they did not want to keep it to rent it out to others, extract their equity, and purchase a new home at their new station (more about this in future blogs) they would essentially walk away with 30-50k in cold hard cash.
Now let's look at this scenario vs...
Average rent in, let's take, Colorado Springs, is $1140. That is a 4% increase over last year. So let's also assume that they will see another 4% increase over the next year. At the end of the two year period, they will have spent $27900 on rent for another persons property. Seriously, take that in. $27900 thrown out the window. Trashed. Wasted. Oh you are buying a house alright, it just isn't yours.
So how does this tie into the beginning scenario of sticky tables and overcluttered bathroom vanities. Renters typically do not have the same level of reverence for their living domicile which carries over to every day life. Also, not having a home to take care of and fix and tinker and improve, renters find themselves shopping at the PX/BX more, eating out more, collecting material possessions that are disposable and depreciate. Think of the last time you drove through the local post apartment complex, how many high dollar depreciating automobiles did you see in the parking lot? That's right. Renters typically sink their money into depreciating assets and struggle to see any real financial improvements in their life....and much of that is simply lack of knowledge. They don't know if they can qualify for a VA Loan. They don't know how to begin the process of buying a home. They simply have not been educated how easy and satisfying the process of purchasing your first home can be, and that my friends, is why we are here.
It is important to us here to help all of our Comrades, Veterans, Active Duty improve their quality of life as much as possible. Since financial freedom is a huge component of your well being, we here at VHN believe educating on the long term affects of renting vs. buying is crucial. Look at the following graph.
The long term implications are mind blowing and the sooner you are able to jump off the rental roundabout, the better. Don't worry about being embarrassed about credit, we have solutions. Don't live in wonder if you even qualify, we can help you. Don't worry if you have too much debt, we have plans. Don't hesitate. The market increases every day. VA Loan interest rates are at all times lows. In a recent Gallup poll, 70% of American rated real estate their best investment for the seventh year in a row!
So reach out to us, hop on the bus and in the words of Paul Simon......"set yourself free!"