A few of you exceptionally brave readers have asked me to write about Hawaii real estate.
Better yet, I found local professional realtor Randy Prothero to discuss the subject.
[Nords note: In general, servicemembers on active duty should not buy a home— no matter where they’re stationed. But see my comments and disclosures after the end of this post.]
Buying a home in Hawaii could be a means to an end.
Your BAH (Basic Allowance for Housing) combined with your VA benefit, will give you an opportunity to start to build wealth.
Here are the most common concerns about buying a home in Hawaii.
- We will only be here a few years.
- How long will you be at your other duty stations? If you do not buy now when will you buy?
- Homes in Hawaii are so expensive.
- So is renting.
- Your BAH in Hawaii is higher than other places, offsetting the expense.
The government will buy you a home.
- The VA Loan Program gives you a no down payment mortgage. (100% loan).
- No mortgage insurance.
- VA interest rates are competitive and many times it is lower than conventional loans with 20% down).
- The interest on your mortgage payment is tax deductible. You get a double tax benefit on your BAH.
- If you rent you get no tax benefit and you pay someone else’s mortgage for them.
- If you take base housing you are just giving back one the biggest benefits your military service has earned you: Home Ownership and saying no thank you.
You can build wealth while in the military.
- Prices in Hawaii appreciate over time.
- In 1985 the median priced single family home on Oahu was: $158,000.
- In June of 2014 the median priced home was: $700,000.
- Over the short term they can and do go up and down. Like you hear on the radio ads, past performance is no guaranty of future performance. Although it is the best indicator.
What if prices are down when I PCS out?
- Have an exit strategy.
- The military always has an exit strategy when they go into battle, so should you. Buy a home that you can rent out when you leave and still make your payments. That gives you the option of selling it or keeping it when you leave.
- Do not buy the home of your dreams. That comes when you retire from the military or after you have had more time to build wealth. Buy a means to your end.
How to get started?
Contact us at: (808) 625-5057 or Darnelle [at] ProtheroGroup dot com to set an appointment with a VA specialist. We can walk you through the process. Also we highly recommend your attendance at one of the free VA seminars. Contact us to register at the above number or at www.VA808.com
(If you’re interested in contributing at The-Military-Guide.com, please see our posting guidelines.)
[More Nords notes: When you’re on active duty, you don’t know how long you’ll be at a duty station. If you buy a home then you may have to sell the house under adverse market conditions with high transaction costs or, even worse, become a long-distance landlord. I’ve done all of those things and I’ve regretted them during the years it took to recover from those decisions. Your military life will be challenging enough without taking on the additional financial risk.
However, some people feel more comfortable owning real estate than investing in the stock market. A few of you are hard-wired to be homeowners and landlords, and you’ll handle the risks (with the inevitable setbacks) as part of your life. For everyone else considering real estate, I recommend a library copy of the excellent analysis in “Rent vs. Own” before you make your own informed decision. If you’re planning to buy here then it’s probably because you’re planning to live here after you leave the military. If you’re planning to be a landlord here then you should discuss your property analysis at the BiggerPockets.com forums.
Whether you rent or own, the lower your housing expenses then the faster you’ll reach financial independence.
If you decide to buy here, I recommend using a realtor you trust and learning about VA loans. I know the company and the people, they’ve been doing business in our neighborhood for decades, and they’ll treat you right. No money changed hands for this post and there are no affiliate links. However Beau bought me an excellent Zippy’s lunch, and their mahi mahi sandwich comes with extra potato-mac salad!]
Real estate: rent or buy?
So you want to be a landlord.
Book review: Rent vs. Own