You already raised your right hand and made the long-term commitment of military service. Are you ready for another commitment? Next step, buying a home while on active duty.
Every situation is different and there is no one-size-fits-all answer to the question, “Should I buy a house while in the military?” There are a few ground rules though that you can establish to help make the decision more clear.
Should you buy a home in the military?
Purchasing a home is one of the largest investments you will likely make over the course of your life. Approach the decision with caution, especially knowing the level of uncertainty the military lifestyle throws into the equation.
Let’s start with your most obvious questions first:
Environment
Will buying a home provide the best available environment for you and your family at your new assignment?
To answer this question, you will need to flex your research muscles. What housing is available to you at your new assignment?
There are usually four options to consider:
- On-Base Government-Owned Rental
- On-Base Privately-Owned Rental
- Off-Base Privately-Owned Rental
- Off-Base House Purchase
Not every location is the best place to buy. Some assignments have excellent, readily available on-base options that check almost all the boxes for military families. Other locations have limited on-base options and the quality is lacking.
Sometimes, the areas around the military installation are not the most appealing for family life, yet other locations have bustling neighborhoods within a short commute.
Every single spot is different, so get insider knowledge before writing off one housing option or another.
Here are a few resources you can use to tackle this initial research phase:
- Crime: https://spotcrime.com/
- Schools: https://www.greatschools.org/
- Commute: https://commutetimemap.com/
- Facebook Groups: Join the official spouse group and official military installation group
- Local Realtor Insight: Get connected with a local Realtor to ask initial fact finding questions (WeVett Realty can link you up with a military friendly agent)
- Rental Sites: Trulia, HotPads, Realtor.com, Zillow, Homes.com, Rent.com, Apartments.com, Military By Owner
- Purchase Sites: Realtor.com, Zillow, Military by Owner
Finances
Can you purchase a home and see financial gains or, at a minimum, no financial loss?
Finances will (and should!) play a big part in the home buying decision. The costs associated with both renting a home and buying a home can be formidable and going in blind is a recipe for long-term financial stress.
First, figure out your Basic Housing Allowance (BAH). Here’s a handy BAH Calculator that will tell you how much you’ll be awarded at your next assignment.
Typically your on-base, government housing options are going to cost the same as your BAH rate. Privately-owned rentals near military installations will often track BAH rates as well and rental costs will be close to your monthly allowance.
Sometimes though you can find rentals that are less than your BAH and you will be able to pocket the extra. Just don’t forget to account for utilities (water, electricity, gas, trash, etc.) if they are not included in your rent cost.
If you buy a home, make sure you calculate your monthly mortgage payment and utility costs and compare with your BAH rate.
Second, how long are you going to be stationed in this location? If it is less than three years and you don’t intend to turn your home into a long-term rental, then it is usually not a good idea to buy a house.
Our Buy vs Rent Classroom series dives into this much deeper, but the gist of it is, you could end up underwater on your home if you go to sell too soon. You won’t have enough time to recoup your purchase costs and could end up having to bring money to the closing table.
Process
Will the process of buying, selling and/or renting be a huge burden or only a minor inconvenience?
Buying a home can be a process. Don’t underestimate the time and thought it takes to search for and close on a home. If you are in a complicated transition period – deployment, career change, family circumstances, etc. – make sure there is someone with the capacity to take on the communication and execution needs of a home purchase.
A typical home purchase takes about 30 days to complete. This excludes the time it takes to gather your purchase team together, secure financing and find a home. If you’re on a short timeline, you will need to move quickly to manage a door-to-door move.
Selling a home is also a process. Once again, make sure you have a point person willing to take on the cleaning, staging, listing and contract stages of getting the home sold.
If you choose to rent out the home when you PCS next, you will need to either find a property management company to take care of the property and manage leasing and tenants while you are gone, or you will have to take on the tasks of managing your property, finding tenants, etc. from afar.
Importance
How important is owning a home to you?
For some people, all the challenges above are negligible. The importance of owning their home outweighs the risks– and that is okay! As long as you go in knowing what you are getting into, then you’ll walk away happy with the result.
If owning a home is important to you, someday, but it’s not the right time or situation this time around – that is okay too. Renting does not have to be permanent. There will be a time in the future when the stars align and you are ready to make the leap.
Pros and Cons of Buying a House in the Military
| Pros | Cons |
|---|---|
| Total Customization | Upfront Costs |
| Build Equity | Responsibilities when PCSING |
| Tax Breaks | Maintenance and Repairs |
| Potential Passive Income | |
| VA Home Loans |
The Pros
Total Customization
When you buy a home, it is 100% yours. Want to rip out a wall? Go ahead. Plan to lay brick pavers in the backyard? Go for it! You are the one calling the shots for your property, and unless you are building new structures that need city approval or you have a strict HOA, then the only thing holding you back is your own creativity and budget.
In most cases, renting a home doesn’t give you that flexibility. If you have a lenient landlord, you might be able to paint a wall or plant flowers, but in general, the changes you can make are minimal.
Owning a home in the military gives you the chance to make your PCS location feel more like home.
Build Equity
Building equity is huge for your long term financial future. Paying down your mortgage helps you to build equity, and if you are fortunate, your home might also appreciate in value. The more equity you’ve built, the more money you will walk away with whenever you decide to sell your home!
One of our goals at WeVett is to help you have a paid for or nearly paid for home by the time you leave military service. One of the ways you can accomplish this is by first making the right housing decisions at each assignment and second, working to build up that equity each time you decide to buy.
Many times renting can be the right answer, financially, for the short-term or for specific assignments. Renting, however, will never build you equity.
Tax Breaks
Homeowners can save money during tax season for owning a home in the military! Certain homeowner expenses can be deducted when filing taxes – mortgage interest, discount points, property taxes, home improvements, capital gains, etc.
Granted, renters do not pay certain fees and taxes, like property tax, but they also don’t receive any housing tax breaks either.
Potential Passive Income
If creating a rental portfolio is of interest to you, buying a home is the first step in that process. Many military families create a steady stream of passive income by making wise home purchases (based on the rental market and demand) that they turn into long or short term rentals after they PCS.
The key here is researching the rental market before buying your house. Buying a home and just assuming it can be a rental is the absolute wrong way to go about creating passive income. If done incorrectly, you could end up with a vacant property and paying a mortgage for a home you don’t live in.
Our Sell vs Rent Classroom series gives you a step-by-step analysis of how to analyze a home as a potential rental. Check it out before deciding whether or not becoming a landlord is the right path for you.
VA Home Loans
A major advantage of buying a home in the military is access to the VA loan. Backed by Veterans’ Affairs, the VA loan offers military huge savings for home purchases, such as no down payment, no private mortgage insurance, and lower interest rates than traditional home loans.
Access to this benefit alone can often mean the difference between renting and buying a house for many people. If you want to compare your options with the VA loan in mind, we offer free consultations to walk through whether your situation is best for buying or renting. Contact our team here.
The Cons
Upfront Costs
It usually costs more money upfront to buy a home than it does to rent a home. Your mortgage payment can often be cheaper than monthly rent, but the initial closing costs of a home purchase will usually be 2%-5% of the purchase price of the house.
On a $300,000 home, that might end up anywhere from $6,000 to $15,000. That also excludes any down payment requirements on the loan.
In comparison, rentals only require a security deposit, pet deposit, and potentially 1-2 months of rent payment upfront – far more affordable than a down payment!
Responsibilities when PCSing
Owning a home in the military becomes more complicated when it is time to PCS. Making the sell vs rent decision, packing, prepping your home, listing or leasing, and following through on the sales or management contract all get added on top of your typical PCS process.
If you are in a rental, your only responsibility is packing, cleaning and closing out any other requests from the landlord.
Maintenance and Repairs
If you are renting a home and the dishwasher starts leaking, you have the luxury of picking up the phone and calling your landlord – on their dime. If you own the home…well…better get to work, or call the repairman!
Many home experts say you should expect to pay 1-4% of the purchase price each year on maintenance and repairs. For this very reason it’s extremely important to check the major systems and structure of the home (HVAC, roof, windows, siding) before you make the purchase. The last thing you want is to have an unforeseen major issue deplete your savings!
Buying a house while on active duty can be a blessing and will often make your duty station truly feel like home.
Ask the right questions, weigh the pros and cons, and if the time is right, we would be happy to help you make that homeownership goal a reality!
Get started on the process with us: www.wevett.com/getstarted
