Buy or Rent a Home? 5 Solid Strategies for Military Families Making the Decision
If there is one certainty about military life, it’s moving. However, relocating on average every three to five years makes it all the more challenging to know what makes sense: to buy or rent?
Military families must make housing decisions, often in a short amount of time, and it can feel overwhelming trying to figure out the “right” choice. Will you be throwing money away in rent and losing potential equity by not buying a home? Is buying a home ever worth it while serving in the military?
Conventional financial wisdom cautions would-be buyers to “stay in a home long enough (at least five years) for a buy to make sense," yet that wisdom would rarely apply to military families.
Being in the military definitely throws a wrench into mainstream advice, but there are several solid strategies to help you determine if owning a home or renting is the best way to thrive in your new location.
Buy or Rent a Home? 5 Solid Strategies for Military Families
1) Evaluate the “Rent vs. Buy Window”
Short-notice moves, the unexpected PCS, or drastic lifestyle changes are always a possibility in the military. Perhaps the single biggest factor for successful, a.k.a. profitable, homeownership is not actually staying in a home long enough for buying to make sense.
It’s determining if a potential buy could also be sustained as a rental property.
There actually is a strategy for evaluating homes this way-- the “Rent vs. Buy Window.” In essence, if you bought a home and subsequently had to rent it out – would current rental prices be enough to cover the mortgage?
If Average Market Rent is higher than an Average Mortgage = Buying is favorable. It actually might be cheaper to buy a home versus rent.
However, if the inverse is true and an average mortgage will be higher than rent for a comparable space, it likely doesn’t make the best financial sense for a military family to buy in that market. This scenario offers the least flexibility for a military family and could result in a financial loss in a tough market when homes aren’t selling quickly and market rents aren’t enough to cover your mortgage.
To determine the Rent vs. Buy Window, you’ll need to take a look into a given market, and see what average listing prices are to estimate a typical mortgage, then simply compare mortgage estimates against average rental prices. Of the plethora of financial websites and calculators available, I’ve yet to find one matching the efficiency that MilitaryByOwner offers. MilitaryByOwner searches can filter listings by state or military base and show average listing prices and comparable rents, but the true gem is that searches also include base information, the distance of the home from the closest installation, and user-friendly mortgage and BAH calculators – all on one page.
2) Understand Market Drivers: How They Help You Make a Decision
While knowing whether a market is more favorable to buying or renting is useful, it isn’t the only market consideration. A military installation is great, but what else is keeping a market strong?
There are three telling clues that can help reveal the economic sustainment of a market. Expansions in any of these areas signals an increase in population growth, jobs, and an increased demand for services and housing.
Eds: If you are moving to an area that is also home to universities and colleges, are they attracting students and creating new programs and facilities? Is the average freshman class increasing or decreasing, in enrollments?
Feds: The federal government spends a significant amount of money in market research, before any decision involving real estate is made, through the General Services Administration (GSA). In short, the GSA is the “real estate arm” of the government, including constructing, managing, leasing, and building preservation. The GSA also has an online newsroom, making it easy to see markets and locations where money is being spent, or scaled back, for real estate-related endeavors.
Meds: Healthcare and hospital expansions do not exist without staff and patients, thus an increase in the medical care of a community signals existing and anticipated population growth. Additionally, healthcare facilities are among the most expensive to construct, and an expansion signals market confidence that the investment will be worth it.
Strong market drivers, such as "Eds, Feds and Meds" are all positive signs for buyers and offer multiple financial strategies. A market attracting sustainable growth will also attract future buyers and tenants. This allows the option to become a landlord and realize cash flow from rents, or "buy and hold" a home, and likely realize future market appreciation and profit when you do decide to sell.
3) Identify the “Suck” About a New Base, then Capitalize on It
No location is perfect, and there are usually a few challenges that immediately bubble to the surface. What do other military families have to say about your new location, particularly neighborhood and housing reviews?
As you scour real estate listings, consider how a potential home meets – or doesn’t – the following four essential lifestyle factors.
Amenities: What services, grocery stores, gyms, shopping, restaurants, and entertainment options are nearby?
Schools: What districts and schools are the most desirable? And what listings fall within these districts?
Commute: What commute will this neighborhood offer, both for service members and a working spouse?
Safety: Identify crime hot-spots to avoid, through reports of criminal activity and offender lists. (Related: What Is Your Due Diligence as a Homebuyer or Renter?)
If a listing addresses one or more of these concerns, particularly for military families and within a reasonable budget, it will be well poised to serve not only your own family’s needs, but future buyers or renters as well.
4) It Doesn’t Need to Be the “Dream Home” to Be a Good Buy
It’s often hard to keep emotions in check as you walk through a home and try to picture your own family living in it.
Of course, we all want the best possible home for our families. But as you evaluate listings, mentally prepare that some compromise might be necessary. A smaller home in an excellent school district might be more beneficial to your family than the latest chef-inspired gourmet kitchen and home design.
5) Think Ahead to Retirement Location or Investment Opportunity
Real estate can be a great investment, both in terms of future appreciation and cash flow from rents.
If your new PCS location is a prime consideration for retirement, in a strong and sustainable market, and you’re mentally prepared for what it takes to maintain a rental unit, either as a landlord or through professional property management, it may be a prime opportunity to buy real estate.
PCS'ing in the military is never without stress. Ease some of that stress with the wealth of information available at MilitaryByOwner.com. Each article and ebook is written by real estate experts who truly understand the housing challenges facing the military community and offer thorough and timely resources to provide you with actionable knowledge to make the best housing decisions for your family.
About the author: Kristi Adams is a proud Air Force spouse and served on active duty herself as a Space and Missile officer. She is an Associate Professor for the University of Maryland’s School of Architecture, Planning, and Preservation and holds a Master of Real Estate Development degree from the university. She and her husband have profitably owned rental properties since 2004. When Kristi isn’t writing about real estate, she’s writing about travel and has been published in several books and national publications. Find more of her writing at: www.KristiAdamsMedia.com