Deciding to purchase a home while on active duty is a bit intimidating to some. It might make more sense to rent at one duty station and then buy at the next. A lot also depends on the housing market at the new duty station. Is it a ‘Buyers’ Market’? Are your orders for two years or three? There are numerous pros and cons to consider when deciding whether to rent or buy.
THE UPSIDE TO RENTING
When you rent, you can move without penalty when the lease ends. If military orders have you moving before your lease is up, the military clause in your lease can release you from your rental obligations.
• Financial Predictability
Your monthly housing expenses remain constant each month. Any increases in rent require notice and usually do not occur until the lease runs out.
• Minimal Responsibility
Your landlord or property management company will take care of most of the repairs and maintenance.
THE UPSIDE TO BUYING
• Financial Investment
Purchasing the right home can be a tremendous financial investment which grows in value over time.
• Tax Deductions
• Deductions such as property taxes and mortgage interest can significantly reduce your overall income tax burden if you itemize.
• Less Money Down
There are no security or pet deposits when you buy a home.
• Add to your Savings
A mortgage payment lower than your BAH can result in a boost to your savings.
• The Chance for a Second Income
You have the opportunity to become a landlord when military orders arrive, and you have to move. Your home can become an investment property, providing a source of income which can partially or entirely offset your mortgage, taxes, and insurance payments.
Along with pride of ownership, becoming a homeowner can give you a sense of security which is rare in the nomadic military life.
• Goodbye White Walls!
You are free to paint and decorate however you want! Hello Color!
THE DOWNSIDE TO BUYING
• You have no control over when military orders arrive. You might not be able to sell when you need to. The local housing market could be on a downswing, or a residential construction boom could mean a massive surplus in inventory keeping housing prices suppressed. Although you are building equity, it doesn’t always equate to automatic profit. Your home could be underwater, meaning your outstanding loan is more than what the house is currently worth.
• If you can sell when orders arrive, there are significant transaction costs involved such as the commissions for the buyers and the listing agent. A potential buyer may ask that you pay part of the points or closing costs.
• Once you own a home, it is a lot harder and much more expensive to change your mind. If you find commute times from your neighborhood are not manageable; getting out of a lease is a lot cheaper than selling a property.
• The cost of repairs, Homeowner’s Association (HOA) dues, property taxes and more, all come out of your pocket as the homeowners. The overall cost of homeownership tends to be higher even if the mortgage payment is lower than comparable monthly rent.
• The financial obligations of a house can fluctuate wildly from month to month. One month you may have just the mortgage and utilities to pay. Another month, in addition to the mortgage and utilities, you may need to hire a plumber or electrician or purchase a new appliance.
THE DOWNSIDE TO RENTING
• If your landlord decides to sell the property after your one-year lease is up, you might have to move unexpectedly before your two or three-year tour is complete. There are other unknowns such as increases in rent or an unbearable neighbor across the hall.
• Another downside to renting is that you are not building equity with monthly rent payments.
• Reverse Military Clauses are becoming popular for military landlords. Renters may have to move out early when the military owners PCS back into town.
• Renters are not eligible for mortgage interest or tax deductions.
• Pet and security deposits are the norms for many rentals. Some pet deposits are non-refundable.
• You cannot always decorate how you want. You may not be able to paint the walls or plant rose bushes in the front yard. And if your landlord does allow you to paint, you may be obligated to paint it back to the original colors when you leave.
• You may have restrictions on family members staying for an extended period if they are not listed on the lease. This is especially important for military spouses who give birth while their service member is deployed. Having Mom stay with you during this time may violate your lease.
• While your landlord is supposed to take care of all the repairs and maintenance, it may not happen during your ideal time-frame. Many renters complain that the landlord “takes forever” to repair anything. Landlords are also often accused of being cheap, going with the lowest possible repair or replacement cost.
Ultimately, the decision to rent vs. buy depends on your personal circumstances. A lot depends on your financial situation at the time, where you are in your military career and the housing market where you are looking to purchase. Will your spouse be able to work at this new duty station? Will you be in place for at least two years? Carefully consider these pros and cons when deciding whether renting or owning at this moment is best for you and your family.
PCSgrades offers Housing Market Reports to help you gauge a particular housing market. New areas are being added all the time so check for updates.
Carla Olivo is a freelance writer and event planner. She currently works as the Director of Strategic Communications at PCSgrades.com, helping military and veteran families when they relocate. She lives near Washington D.C. with her husband, a retired Marine and their two children.