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Plans -- and Budgets -- Change

July 7th, 2019 at 01:05 pm

With the revelation that I'm headed to Idaho for our next assignment, I've been able to spend the last few days looking around at houses, and more generally, figuring out what our budget will look like out there. The biggest unknown right now is "WHEN" -- my current report date in Idaho is in October, but I'm requesting an extension for ~6 months while I'm deployed, so that my family doesn't have to try to move from Alaska to Idaho without me there to help (I'm hoping/presuming that it'll be approved). But I've figured out the general area we want to live, identified a few childcare options, found a university program for my wife to pursue her DPT, and worked out the (tragically long) commutes we'll have. Based on that assessment, I've plotted out a tentative budget plan for when we move to Idaho, and I'm making some changes to our current budget to get us ready for the move.

The biggest issue is that we want to have as small of a mortgage as possible, then once we've got it, we're going to hammer at it to pay it off ASAP. I'm looking at houses around $300k, and shooting for having at least $150k available in cash for our downpayment.

At present, I've got ~$75k in cash/money market readily available that I'm allocating to the downpayment. I have $7k more in I-Bonds that I'll eventually cash out, and $35k in taxable investments that will be cashed out over time as well (waiting for LTCG status on recent purchases). So out of current assets, I've got about $112k ready for the downpayment.

- I've redirected our monthly investments going into stock mutual funds to instead go into our money market fund. Likewise, I've turned off dividend reinvestment.
- I've redirected additional savings for home repairs on our current house, diverting it as well to the MMF
- I'm going to stop the extra principle payments on our current mortgage, and again, divert that into the MMF.
In all, over the next 7 months we should be able to put an additional $23k into cash savings for the downpayment.

Finally, with all of the TDYs that I have/will be doing over the next 8-9 months, if I keep my expenses under control, I should be able to save at least $10k-$12k in per diem.

For those quick with math, I've got about $145k either available or forecasted. That last $5k....I'll have to see where I can scrimp & save to make it. Might not be possible, but we'll see. $150k DP is the goal, and I'll shoot for that.

The good news is that none of this takes into account the sale of our current home. For the sake of minimizing what will almost certainly be a stressful time, I don't want to count on the current home selling before we buy our next one. But once I get home from my deployment, we'll be getting our house on the market for sale, and I'm expecting that we should be able to net $100k-$110k from the sale of the house. Whenever that happens (whether before or after we're into the next house), that entire sum will go straight at the new mortgage. What remains of the mortgage (maybe $50k), we should be able to knock out in about 2 years. And at that point, we'll be 100% DEBT FREE!!!

One last nagging question remains -- a part of me is asking why I want to unplug the $35k of investments for the downpayment, when I could just leave them in place and (hopefully/presumably) continuing to grow.... I already have plenty to avoid PMI, and the eventual sale of our current home will help things along alot. It's coming down to an emotional vs. intellectual decision. Emotionally, I'd prefer to lock in my investment gains and protect them so that the money is available for the downpayment. But intellectually, if I leave the investments in place, they're always still there that I can reach over at any time to totally knock out the mortgage... So as time goes on, I'll have to see exactly what I end up doing....

Changes (and Decisions) Abound

May 24th, 2019 at 01:47 pm

As is typical with military families, we're once again entering into another round of life-contorting changes. I'm up for my next assignment, and the most likely locations are scattered around the world... Germany, Italy, Saudi Arabia, Korea, Arizona, Colorado, or Idaho are all on the table, and we should find out exactly where we're headed next within the next month, with the actual move probably sometime in Oct/Nov. I also just signed a contract to stay in the military for another 5 years, but it did come with an annual lump-sum $20k/yr bonus, so we're going to use that money to help us with our upcoming move & our to-be-determined housing situation (more on that to follow).

As for DW, she was just medically retired from the military in April due to some mental health issues (she's now mostly doing better, gratefully, but was disqualified from deployment & therefore got the boot). She's struggled with accepting the abrupt end to her military career, suddenly becoming a SAHM, but I'm slowly convincing her that it's really a good an opportunity for her to pursue her actual passion, to become a physical therapist. She's been taking a couple pre-req classes, and soon she'll start shadowing the physical therapist on base to regain some recent experience, then depending on where my next assignment takes us, she'll be applying to schools for earning her DPT. Financially, we're in a good place for it -- she gets a small retirement/disability pension from the military, plus she's got the Post-9/11 G.I. Bill that should cover most of her costs. I'm excited for her, and as long as we can keep her focused on that end goal, I think she'll end up very grateful for this opportunity.

The other big change (or decision, really) on the horizon will be what's going to happen with our current house. We like our house, it's in a great neighborhood, and we'd love to come back to live here in Alaska at some point in the future. We also love the idea of building a small portfolio of rental houses, and currently have one in OKC (our previous assignment) that is doing very well. However, this house is double the value of our other rental, we still owe $279k on it, and our total PITI (not escrowed) is ~$2700/mo. Realistic rent for it is probably between $2500-$2600/mo. So the cashflow would be tight, particularly in vacant months. One option we're considering is to recast our incredible 2.375% mortgage, and doing so with a $50k-$60k payment would reduce the payment to $2200-$2300/mo, which would make it much more manageable. The ROI isn't phenomenal, but we'd be looking at ~12% IRR on it, so not terrible either. On the other hand, if we just went with selling it outright, we'd probably do no more than break even (perhaps even take a "small" loss of $10k-$15k. We're starting the conversation with our realtor friend, and we may end up just dual-listing it (sale or rent), and take whatever bites first that looks good.

On the back side of the upcoming move, what's next? Buy again, or rent? Between our cash & investments, we'll have at least $40k-$50k available regardless of what happens with our current home, so that should probably cover at least a 20% downpayment if we do buy another home. However, depending on the location, just living on base & renting might not be a bad option either. We'll have to evaluate it carefully once we know where we're going. I really like our current rental, and I'd like to keep some property here in Alaska (either this one or a different place)... But I don't want to overextend us with rentals dotting the country. Once I eventually leave the military and we settle down in one place, I'll most likely sell everything and rebuild the real-estate portfolio locally (whether that's here in Alaska or perhaps elsewhere).

Who knows what the next few months/year will bring for us... Alot will be driven by the location of my next assignment. I hope they release our assignments soon!