Military PCS Question: Should I Sell or Rent My House?

Military members and their families are familiar with packing up and moving regularly. You may think the next permanent change of station (PCS) means selling your current home and moving to a new one. While this used to be the case, many are now using homes as investment opportunities by turning them into rental properties.

There are tips for buying a home as a member of the military, but you may be needing some information on whether you should sell or rent your house when you receive orders to move.

The Rental Decision

The first thing you have to consider is whether you want to take on the responsibility of a rental property.

Real estate investing can be an excellent source of additional income. It can also let the equity you own in your home build. According to Redfin, homes in the Olympia area were up 13.7% in May 2022 compared to last year. Homes in DuPont were up 15%! While that may seem like a reason to sell, you can also take advantage of renting in a hot market.

But with additional income comes a vast amount of additional responsibility! By renting out your home, you are entrusting your property to a renter. If that renter creates problems – missing rental payments, damaging property, behaving in an unsafe or unsavory way – you will be held responsible. Not all renters are created equal so be sure to do your research!

Deciding whether to rent or sell is just step one. If you do decide to rent your home, there are many more decisions to make down the road.

Pros and Cons of Renting Out a House

There are arguments for and against renting out your home. You should consider these carefully before deciding whether to sell or rent.

Additional Income

This is, of course, top of the pro list! But additional income is not a guarantee.

You need to know if there is a demand for rental properties in your area and the average rent. Consult a local realtor website or MilitaryByOwner to see the climate in your neighborhood. You can also use this site to advertise your rental property. Then it’s time to take out the calculator and see if that dream of additional income has a real chance of becoming reality.

Cash Flow

Renting out your home is not just about locking up and leaving the keys with someone new. There is money involved! And if you don’t have access to a cash flow, the cons may outweigh the rental pros.

For instance, there will be repairs and upgrades you will most likely have to make to your home before even putting it on the market. Analyze what needs to be done and what is popular in the area. You may need to spend money on new fixtures or appliances. Make sure you have the cash flow to do that without jeopardizing your overall financial standing.

New Role: Landlord

Are you ready to take on the role of a landlord? This can mean tracking down renters, making repairs, and keeping the property in good shape. While there are options for taking a more “hands-off” approach to renting out your home, your name will ultimately be the one on the lease. You will be the responsible party if something doesn’t work out right.

Decide whether being a landlord is a plus in your book. If it’s not, renting your home may not be for you.

Getting in the Game

Are you ready to take on a new challenge that may be rewarding? Renting out your home can get you started in the world of real estate investing. If this is something you’ve been wanting to try, renting out a single property first may be a good starting point.

Don’t Go It Alone: Using a Property Manager

A property manager can be a lifesaver if you don’t want to be involved in the nitty-gritty of renting your home.

A property manager will take on all the tasks associated with renting out your home. From vetting the tenants to having a maintenance team on hand, you will have someone there to take on those time-consuming tasks and keep you on track.

But their work doesn’t come for free. Fees for property managers can range from 8 to 12%. If you want to do it yourself but need a little assistance, there is landlord software available to help you stay organized.

Buying a Second Home: The Finances

Let’s say you’ve reviewed everything above and decided you want to buy a second home while keeping your current home. If that’s the case, it’s time to think about finances.

As a member of the military, you can use a VA loan backed by the Department of Veterans Affairs to finance up to 100% of your home with no down payment. Using this benefit for your first home requires certain steps and documentation, but can you use a VA loan to buy a second home?

The short answer is, yes. There is no limit on the VA loan benefit. However, you are restricted based on eligibility and entitlement.

VA loan entitlement is the dollar amount the government will guarantee on your VA loan. The entitlement amount is typically either $36,000 or 25% of the loan amount up to the conforming loan limit.

Once you use your VA loan, using it again without paying off the first loan requires special circumstances. You must meet eligibility and entitlement requirements based on both loans.

Plus, when you take out a second VA loan, your loan limit is based on county loan limits. In other words, the government will pay up to 25% of the county loan limit if you default. A good tip is to try to have enough entitlement left over to cover 25% of the overall loan amount.

Should You Rent or Sell? Let ACU Be Your Guide

At America’s Credit Union, we know you have questions and we strive to have the answers. Our team of military family experts is available to guide you through all the tough decisions. Whether it’s deciding about a second home, choosing whether to buy or rent, or mortgage assistance, we are always here for you.

ACU was recently recognized as one of the best financial institutions for members of the military. We couldn’t be more proud! From banking to mortgages to other loans, we are your military experts. Learn more about our programs today!