By Claire Wood
In case you’ve missed it, all year I’m sharing our family’s process of making big financial decisions based on unique factors of military life. In January, that looked like performing a Cash Flow Analysis to create an overview of spending for the year and, in February, I dove into the topic of Life Insurance.
This month, I want to pull back the curtain a bit on how military families can make the right choice on whether it makes more sense to purchase a home or rent one.
In our eleven years of service, my husband Ryan and I have owned a home and later rented it out. We ourselves have rented two homes and we have chosen to live on post (essentially renting) three times. Each choice has its merits and drawbacks. Currently, we are in the middle of a PCS. My husband has already reported to our next duty station in Virginia and the kids and I are still in Kentucky as they finish up the final weeks of their school year.
This PCS more than most had us really waffling between what option would suit us best. I’ll admit, in the early stages, no decision felt right. Living on post wasn’t a great option for our high school daughters with poorly rated schools nearby. To be off-post meant a longer than preferred commute for Ryan. It also meant we would either overpay in rent or overpay to buy a home.
These past 12-18 months have been a wild ride in the housing market. Inflation along with supply and demand have caused prices to skyrocket and the housing industry has not been spared. Military families have been legitimately between a rock and a hard place when it comes to finding quality, available, and affordable housing.
In just about any scenario, you can find data to support the financial math in favor of renting or buying a home. Some argue renting is throwing away money, while others say the sunk cost compared to owning is negligible. Others might favor purchasing a home as a better long-term financial investment, while others say it’s not practical and very expensive when you factor in the opportunity cost of owning.
So this begs the question, “As a military family, should we rent or buy a home?”
Below are three important considerations to help you make a more informed decision.
One of the first steps in determining your best housing option is to lay out all of the actual monetary costs at your upcoming duty station. You should get a grasp on the current BAH, an accurate number on “what you can get for the money” both renting and buying a home in your preferred ZIP Code, and an overall, realistic snapshot of your family budget.
If purchasing, what kind of down payment can you afford? Would you choose a VA Loan with zero down but be willing to have a higher monthly payment? Or would you prefer to use your liquid, cash savings to reduce the monthly mortgage amount? Don’t forget private mortgage insurance and property taxes!
Additionally, be sure to factor into your housing costs things like average utility costs, landscaping, security monitoring fees, any homeowner association (HOA) fees, and general maintenance. Are there any additional out-of-pocket costs you might incur as a renter or homeowner? Run those numbers and see what you can realistically afford.
Beyond the obvious housing costs, don’t forget to add in fuel costs or savings based on your commute and whether or not you will take advantage of public schools or choose to pay tuition to a private school.
It’s easy to let the majority of your financial focus on home ownership or renting becomeshort-sighted and zeroed in on the immediate need to cover your housing situation. Don’t forget to contemplate your exit strategy from your home as well. If you purchase, when orders come down for your next assignment, do you plan to sell the home or rent it out as an investment property? Always do your homework before you decide to buy in a particular area by getting hard resale data from a trusted real estate professional on market trends.
Quality of Life:
Now that you have done the math and looked rationally at your housing options in black and white, it’s time to begin thinking about other aspects of your housing that can’t necessarily be measured with a calculator and a spreadsheet.
There are already a lot of stressful aspects to military life, so be sure whatever choice you make between renting and buying does not add stress to you but rather enables you to have the best possible quality of life during your time on station.
Can you make a list of the top priorities that would ensure a good quality of life at this assignment? There are many components to consider:
- Do you have children? If so, what are their school needs? What are their social needs, such as proximity to extra-curricular activities?
- How important is it to have a short commute to and from the base versus how important it is to be in a close footprint to shopping, care providers, restaurants, places or worship, or schools?
- How and where will you find and plug into your community? Will this be among your neighbors, co-workers, or among other social groups?
- Will you and your servicemember have time and resources to invest in home renovations, repairs, or even basic maintenance or will you need a home that requires little effort to keep it functional?
Peace of Mind:
Once you have settled on the financial impact and quality-of-life issues, it’s time to hone in on how either option of renting or buying will create or foster peace of mind. Ideals like happiness, tranquility, and contentment should not be overlooked when making this important decision about housing.
Again, if list-making is a helpful practice for you, make a list of how buying a home versus renting one might provide peace of mind.
Buying: Our hard-earned dollars are building equity in an investment that’s solely ours, it’s our space to decorate and make livable as we please. There are no restrictions for our pets and furry critters living here. We could sell or rent it when we PCS and stand to make a profit to further our future goals and dreams.
Renting: Someone else is responsible for the upkeep and repairs. When it’s time to PCS, we give notice and leave with no worry of trying to sell or rent it. We are able to use our income and savings to fund other goals and dreams instead of using that money for a down payment or repairs.
My family utilized these three criteria for our own decision making, and ultimately decided renting was our best route. While our rent will be over our BAH by about 9%, when we leave, all of that rent we’ve paid will have helped to pay down the property owner’s mortgage, not our own. However, knowing we may only be at this assignment for 18-24 months and seeing how inflated home prices are in this area, we feel confident that we made the right call for our current circumstances. Buying now would prevent us from having the bulk of our savings liquid when the time is right to purchase our forever property
Are you expecting a PCS in 2022? How does the purchase or rental market look in the area you’re headed to? Besides the financial, quality of life, and peace of mind aspects of making a decision, do you have any other factors that play into your choice of whether to rent or buy? Please share your process in the comments below! And if you’re looking to dive deeper into all of the angles of the rent vs. buy debate, check out Investopedia’s “Military Family’s Guide to Buying and Selling Homes.”
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