I am 22 years old and in the midst of separating from the Marines. I need some advice on how to manage my assets and best prepare for my future. In the last year I began playing around with investments and working to understand stock trading. I have done ok for my knowledge level, averaging close to 14 % gains. I playing with the idea of buying a house once I move back to CO using the VA home loan (This means No down payment and the government insures it up to 25%). I could pay for the mortgage by renting out extra rooms. This would also tie up my money so that I could receive education grants. Therefore allowing me to save my GI BILL for my master and follow on schooling. Is the housing market a good investment? Is this a good move for me? If no, what would your recommendation be? My assets are as follows. Roth IRA 10,000 Stocks 9,000 savings 7,000 Debt on Car 7,000 (2.1% interest)
2 Answers
It's not usually a good idea to buy a house as an investment. Buy a house because you want the house, not for an investment. Your money will make more money invested somewhere other than a house.
Additionally, based on talking about renting rooms to pay the mortgage and the GI bill, I assume you are planning on going to school and not working? I am not that familiar with VA loans, but I imagine they will require you show some form of income before they are willing to give you a loan.
14% returns over the long run are very good, but last year the market was up almost 30%, if you were only at 14% for last year you left quite a bit on the table. I would advise against individual stocks for investments except as a hobby. Put the majority of your investments into ETF's/low fee mutual funds and keep a smaller amount that you can afford to lose in stocks.
-
+1 Agreed - you can look at Case Shiller research that shows that the price of any given house rises at about the same rate as inflation over time. Most of the price increases above that rate are primarily due to newer houses being bigger, nicer, etc. So homes are a good store of value but not a good investment, but can be a wise financial move if you plan to live there or operate a business as a landlord. The main reason to buy a house is so that some day, you will no longer have to pay rent. Nov 7, 2014 at 16:23
Welcome to Money.SE, and thank you for your service.
In general, buying a house is wise if (a) the overall cost of ownership is less than the ongoing cost to rent in the area, and (b) you plan to stay in that area for some time, usually 7+ years.
The VA loan is a unique opportunity and I'd recommend you make the most of it. In my area, I've seen bank owned properties that had an "owner occupied" restriction. 3 family homes that were beautiful, and when the numbers were scrubbed, the owner would see enough rent on two units to pay the mortgage, taxes, and still have money for maintenance. Each situation is unique, but some "too good to be true" deals are still out there.
