Keeping Your Home and Becoming a Landlord

Many service members keep a home when they PCS and rent it out. It can build long-term wealth, but it is a business, and it should be treated like one.

Run the numbers honestly

Total monthly cost includes the mortgage, property tax, insurance, HOA dues, a maintenance reserve, property management fees and a vacancy allowance. Compare that to realistic rent for similar homes nearby, not the most optimistic listing. If rent does not cover the full cost, you are subsidizing your tenant each month, which may be fine if you are confident in appreciation and have the cash flow, but go in knowing it.

Insurance and mortgage changes

• Switch from a homeowners policy to a landlord (dwelling) policy, and consider umbrella liability coverage.
• Tell your lender you are renting it out. VA loans allow renting after a PCS if you lived in the home first.
• Your tenant should carry renters insurance.

Property manager or do it yourself?

Managing from another state or overseas is hard. A good property manager handles tenant screening, rent collection, repairs and legal compliance for a percentage of the rent plus leasing fees. Interview several, ask about their eviction rate, how they price repairs and how quickly they pay owners. Read the contract's termination clause.

If you self-manage, line up a trusted local handyman, use online rent collection and learn your state's landlord-tenant laws on deposits, notice periods and evictions.

Screening and leases

Screen every applicant the same way: credit, income, rental history and background checks within fair housing law. Use a state-specific lease. Consider a military clause if you rent to another military family.

Taxes

Rental income must be reported, but you can deduct expenses and depreciation. Selling later has special rules: military members on qualified official extended duty can suspend the five-year test for the home sale exclusion for up to ten years. Talk with a tax professional or use MilTax, since rules are detailed.

Prepare the house before you leave

• Fix deferred maintenance and service major systems.
• Document condition with photos and video.
• Keep spare keys and appliance manuals for the manager.
• Set up a separate bank account for rent and expenses.

Have an exit plan

Decide in advance what would cause you to sell, such as a large repair, long vacancy or a change in plans. A plan keeps one bad month from turning into a panic sale.