Building Wealth While Serving Through Home Ownership

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Military life is full of uncertainty, but there is a virtual guarantee that, at some point, you'll be ordered to move.

Since that reality of military service is unlikely to change any time soon, troops and their families must face the question of whether to buy or rent a home while serving.

For many, renting is a great solution. With rental options plentiful around most military installations and Basic Allowance for Housing (BAH) designed to cover your rent (and maybe a little bit more if you find a less expensive place), renting can offer comforting flexibility.

And if you face an unexpected rotation or deployment, there are laws to protect you from liability when breaking a lease. Even with a regular permanent change-of-station (PCS) move, renting makes leaving as simple as giving your landlord advance notice of when you'll be out.

But there is one thing renting and its convenience can't do for you: build wealth.

Even the most aggressive savings plan will have a hard time competing with the stability and return on investment that comes with owning a home. According to the Federal Housing Finance Agency's House Price Index, home prices in the United States climbed about 34 percent between 2012 and 2017. That translates to equity in your home which you can use to improve or remodel the property, and hopefully that increases the future selling price; or you can sell the home and take the profit and invest in another property.

Military members and families, despite the frequent moves, are actually well positioned to be able to buy a home. A steady income, reliable healthcare, and incentivized savings and retirement plans offered by the Department of Defense make service members an attractive loan candidate. Paired with some financial goal setting (like this checklist from Navy Federal Credit Union), military members and their families can build wealth through real estate while they serve.

So, should you buy a home? Here are some key tips to follow as you explore your options:

  1. Buy in a location with high resale potential. As you look at where your next duty assignment may be, consider home ownership if you're going to be living in a high resale area such as Washington, D.C., or portions of California. While prices may be higher there, the housing stock is plentiful, and your chances of selling quickly when it comes time to PCS are better than if you buy in a remote location with a small military population. It’s helpful to look at the market area and then determine your budget using these mortgage calculators before looking for a home.
  2. Become a landlord. Buying a home and renting it out can ensure you have time to build equity while you are still able to move as the military requires. Be careful, though, if you have a VA loan; that type of loan typically requires you to reside in the home. If you do need to PCS and are having trouble selling your home, you can refinance with an interest rate reduction refinance, which has no residency obligation but does require you to have previously occupied the property. If you are moving out of state, you may also want to consider and build into your rent the cost of a property management company to handle your renters while you are assigned elsewhere.
  3. Math is your friend. Do the math between renting and a home loan based on where you will be living. In some military-heavy areas, the rental market may be inflated and exceed your BAH, in which case you may be better off buying a home after comparing the different types of loans available to you.

    For instance, Navy Federal Credit Union offers a special mortgage for active duty and veteran members called the Military Choice Mortgage. Investigating loans like that, that are crafted to support military members, can increase your wealth long-term. In short, building equity in a home you can rent out might be more advantageous than a high monthly rental rate that eats up your BAH and reduces your ability to save.

  4. Buy smart. If you do decide to buy a home, buy smart. Homes that increase in value generally have a few things in common. For example, they are in a good location, are near quality schools and can be improved upon. A home may seem like a steal but, if no one else wants to buy it after you, you aren't really building equity.
  5. Get military-friendly advice. Military members have a different lifestyle. With a smaller percentage of the population having served, it's essential that you seek advice and information from military-friendly sources to weigh all your options. Find out what another service member did when they couldn’t sell their home or get the pros and cons of renting vs. buying from those you know who have been stationed in an area you are considering.
  6. Research the process. If you’ve never bought a home before, applying for a mortgage can be overwhelming. Thankfully a couple of key strokes can get you to excellent guides like Navy Federal’s guide to the home loan process.

Buying a home is a major life milestone. And while previous generations of military members may have thought home ownership on active duty was out of reach, today's loan options and varying rental markets mean you have more choices than ever before.

Research your options and invest in the property that will help you build long-term wealth, in addition to providing a roof over your head.

For more on home purchasing options visit Navy Federal Credit Union's mortgage and refinancing information center.

Insured by NCUA. Equal Housing Lender.

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Home Ownership VA Loan