Give Rufus Real Estate Investment Advice

[Rufus T. Firefly]

Here's the deal: we sold our place in Pittsburgh a couple of years ago, because we knew we would never live there again and renting it out was a pain in the ass (Pittsburgh's a lousy rental market for houses because it's so cheap to buy there). I kind of like my unbearable lightness of being at the moment, in which I neither own nor owe anything substantial, but all the financial advice I've encountered suggests that I really should have a piece of property by the time I retire. So now I'm looking around (especially since so much is on sale). But this is complicated by two facts:

1) I plan to spend most of the rest of my working years outside the U.S., living in government housing; and

2) I have no idea where we'd be retiring to.

In other words, there's no obvious place in the US -- or anywhere else, for that matter -- where we should be buying. Given that, I can see three options, but am certainly investment-unsavvy enough to believe there are options I'm missing. What I've come up with is:

a) Buy something in DC/MD/VA. We're likely to be living there for a tour in 2010-13, and maybe one more 3-year period before retirement. This would give us an easy place to land for those tours, and should be an easy-to-rent property that holds its value while we're abroad.

b) Buy a vacation home. Every time I finish a tour, I'm required to go on vacation for at least a month. (Really! It's Congressionally mandated!) Since no one in our family lives in a house big enough to host guests for a month, this entails finding a place to stay; having my own vacation home could solve that problem, and I could rent it out the rest of the time. This plan would work best if I were interested in a 4-season vacation destination, because then I could rent it out year-round; unfortunately, I'm partial to the New England coast (epecially Rhode Island, where I have family), but that still makes this viable.

c) Forget living in anything I buy; instead, buy a rental property someplace where property values are nearly certain to hold or rise, and where there's a captive pool of renters to be gouged catered to. Where is this mythical place? College Town, USA. I'm specifically thinking of Austin, since my in-laws are down the road in San Antonio. Iowa City, where I still have friends (including a couple who've made a prety penny in real estate).

I know a bunch of people here seem to have some decided opinions about property and investment. Ok, help me think this through. What would you do?

[Zevico]

Buy low; sell high.

[Bosh]

It's a massive pain to rent any place out when you're out of the country, I woldn't see the point...

[Dinner]

Right now is a terrible time to buy. Take it from someone who did.

After prices get close to the bottom (probably in at least 2 years from now) buy a rental house which you really like in an area you wouldn't mind retiring to and living for the rest of your life. Consider what's most important to you. Is it living near family? Do you love to travel? If so then the place should be near a major airport. What weather do you like and which do you hate? Do you like sports (if so then a town with professional sports teams or active college teams might be for you). How important is the availability of mass transit or cultural institutions like music or museums or art? What about tax rates; will you be sensitive to certain types of taxes and maybe you're looking for a low tax haven?

There are several online search engines which allow you to input these types of factors giving each one the amount of weight you think best and then they'll recommend different towns across the country which meet your needs.

[Rufus T. Firefly]

Your advice is very good, Oerdin. Our problem is that our decision about where to be in retriement will be dictated almost entirely by where our daughter is living; given that she's only now about to start college, there's no way to know where that will be. That's why we're looking at something that we have little intention to live in, except incidently.

[Dinner]

Does your daughter know what she wants to major in? I ask because some careers are center in specific parts of the country so maybe her chosen career is one of them. If that's true then you can make a pretty reasonable guess as to where she'll be living and working. Then again maybe she'll change majors halfway through (and a lot of students do).

[Rufus T. Firefly]

Alas, my daughter will be a liberal arts major, so there's no way to know; after all, there are waitressing jobs evevrywhere.

We're resigned to the idea that any property we buy now is property we'll be selling again when we retire in 20 years. So in some ways we don't need to buy at all; we coul;d just take the equivalent of a mortgage payment and invest it until we need it. It's just that buying plus renting means we'd have a major investment that someone else paid for, which would be nice.