Military personnel move quite frequently (often every three years), it can seem financially impractical to buy a home. They are given the option to live on post or base in staff housing, but often it is not the most desirable housing to live in. As a result, although 64% of Americans own their home, only 38% of active-duty service members can make that same claim, according to Military.com, the remaining 40% rent off post or base and 22% live in military housing.
Owning and even investing in real estate can be done, even while on active duty, and be an appealing option for a growing number who want to take steps to secure their financial future. One example is a family that buys a home each time they are stationed in a new location and then when they move, they turn that property into a rental, or sell when you leave to set you up for your next property purchase. Plus, since many troops return several times to the same duty station, owning real estate gives them a home to come back to later.
Many families find themselves stationed in an area they grow to love and hope to call home after retirement. By purchasing a home there and then renting it out while they move onto their next duty station, military families can create a home to return to once they retire or leave active duty.
A military homeowner’s secret weapon: The VA loan
In an effort to encourage military personnel to purchase homes, the U.S. government has a number of financing options to help out—starting, first and foremost, with the VA home loan.
The Veterans Affairs home loan program offers loans to both active and retired military at competitive interest rates, with no down payment or private mortgage insurance. That’s a bargain compared with the usual 20% down payment and other expenses faced by non-military homeowners. Active military also receive a basic allowance for housing, a nontaxable monthly stipend that can be put toward renting a home or paying a mortgage.
To determine the BAH amount, the service member’s rank and dependency status are first taken into consideration. Then, because the price of homes varies greatly throughout the country, the BAH varies from state to state as well, generally providing more funds to personnel stationed in more expensive areas. For example, a lower ranking officer in the military, based in San Francisco would receive $4,200 per month with dependents, or $3,150 without. A soldier with the same rank in Johnstown, PA, would receive $774 with dependents, or $591 without.
By combining these two, the VA loan and BAH together, buying a home can often be realistically within reach, and a wise investment for our active duty and retired military.
How property managers can pitch in during deployments
If a deployment forces you to pick up and move to a new state, or continent, that can present quite a challenge as you manage the property. It is possible to continue to own your property and turn it into a rental with the help of a property manager, someone hired to stay on top of maintenance, rent collection, and other landlord-related issues for a portion of the rent amounting to anywhere from 4% to 12%.
With the military lifestyle and work demands on active duty, it can be difficult to manage from afar. So hiring a property manager, is a very wise decision. Having a property management company provides you with a peace of mind. That way you are able to focus on your job, and only have to touch base every now and then with your property management company.
Getting Started
Investing in real estate may seem intimidating but resources abound for novice investors. You can find support and guidance at real estate investment companies.
For military personnel trying to decide whether owning a home is in their best interest, the following questions may be helpful to consider:
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Can you cover a mortgage with your BAH? Or What amount of a mortgage can you afford currently?
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Are you willing to hire a property manager and rent out the home when you no longer live there?
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If you decide to eventually convert your owner-occupied home into a single-family rental, would the rent cover your mortgage and fees so you can move on to using your BAH to rent or buy a home in your new locale?
After careful consideration, when you feel ready to commit to buying, make sure you’re in the right hands with a veteran-friendly real estate agent, and consider all of the costs associated with this important investment. You give your service to our great nation, allow professionals who are dedicated to providing veterans and active duty with the highest level of service.
