Renting vs. Buying at a 2-3 Year Duty Station

With the VA home loan offering purchases with no down payment, buying at every duty station can look like a no-brainer. It is not always. Here is how to think it through.

The math of a short hold

Buying and selling a home carries large transaction costs: closing costs when you buy, plus agent commissions, repairs and closing costs when you sell. Over two or three years, normal price appreciation may not cover those costs, especially in a flat market. If you plan to sell when you leave, you may end up behind a family that rented.

When buying makes sense

• You are confident you will be there a long time, or the area is one you are likely to return to.
• The home would rent for more than its full monthly cost (mortgage, taxes, insurance, maintenance reserve and vacancy), so you can keep it as a rental later.
• You have savings for repairs and for months without a tenant.
• You actually want to be a landlord, or you are willing to pay a property manager.

When renting makes sense

• Your next move is likely within three years and you would need to sell.
• Prices are high relative to rents in the area.
• Your emergency fund is thin.
• You value flexibility, such as being able to live on base if housing opens up.

The VA loan is reusable, but not unlimited

VA loan entitlement can be restored when you sell and pay off the loan, and in some cases you can have more than one VA loan at once if you have remaining entitlement. Keeping a VA-financed home as a rental is allowed once you move on PCS orders, but you must have lived in it as your primary residence first. Ask a VA-approved lender to explain your remaining entitlement before you plan your next purchase.

Questions to ask yourself

1. If I had to sell in two years, what would I net after all costs?
2. If I had to rent it out, would the rent cover all costs plus a cushion?
3. Could I handle a major repair from 1,000 miles away?
4. Would buying here keep me from using my VA loan where I want to retire?

A middle path

Some families rent for the first year at a new station and buy only if they learn they will stay longer. Others buy only in areas with a large military population, where demand for rentals is steady. Whatever you choose, do the math with real numbers from local listings and rentals rather than national averages.