Should Military Families Rent or Buy a Home While Stationed in Hawaii? | PCS To Hawaii
You’ve probably just received your orders and are preparing for your upcoming PCS to Hawaii. One of the most important decisions to make is where you will live. When it comes to finding a place for your family to create new memories, even just for a few years, there are a lot of decisions to make. Among these is the question, should we buy, rent or live in base housing? The truth is, everyone’s choice will be different!
If you have made the decision to live off-base, here are some pros and cons to buying vs renting.
What to Consider When Buying or Renting?
Is there an investment opportunity?
Have you calculated 3 years of tax free BAH?
Do you have orders for 3 years or more?
Hawaii home prices are high, but learn the history!
Do you want to learn about wealth building?
Have you owned a home before?
Buying: (renting tips below also)
● The BAH (Basic Allowance for Housing) in Hawaii is one of the highest in the country – Combine this with the COLA (Cost of Living Adjustment) that you will also receive because Hawaii is considered overseas, you will have more money to apply towards a mortgage.
● Invest $40,000+ a year into a home instead of giving it to a landlord – The cost of renting is expensive! At a rent rate of $4,000 a month, you will spend almost $50,000 each year in rent. Also to mention your first month’s rent and security deposit due upon signing the lease. If you rented for 3 years at that rate - $150,000. That is a lot of money! What else can you do?
● Build YOUR wealth! Invest in yourself with the tax free BAH. Hawaii home prices have historically gone up 596.7% for single family homes, and 457.9% for townhome/condos from 1985 through 2022. Info provided by Honolulu Board of Realtors - Historical Data. Although we can’t predict future home prices, checking out the history does give your more insight. If you were able to average 5% home appreciation over time, that is a considerable for Hawaii home price point. We can help you see this, let’s schedule a consult to discuss! Many military families have sold their home, made all most or all of their BAH in return, and continued home investing/purchasing on their next PCS.
● The VA Conforming Loan limit in Hawaii is $1,089,300 – The limit applies if you have a first mortgage and looking to buy a second property while in Hawaii. In January 2020 VA loan limits were removed - which means if you are approved for a $2 Million dollar property - you can purchase it with the VA loan! Our team record is $1.7 Mil on VA loan. Connect with us to figure out how the heck we did that! That’s right - 0% down using your VA entitlement.
Some other benefits with the VA loan entitlement include: it can be used multiple times NOT JUST ONE TIME, it offers lower interest rates or credits from your lender, much easier qualifying criteria, and you can even own more than one home on your VA entitlement at a time.
● Save money while you are in escrow – If you're Savvy, you can save – PCSing to Hawaii, you will receive BAH, COLA, and Temporary Lodging Allowance - these start as soon as you arrive and check in with your duty station. TLA is an offset you receive for the first 60 days that allows you to find a home. Learn more about TLA entitlement at DOD Defense Travel Management Office and request our PCS Packet for TLA approved hotels. Keep in mind, living off post is expensive so you very well may end up spending all of the entitlement you receive. Look for the deals!
● Tax benefits – Yes, you do have to pay property taxes when you own property, but you will get tax write offs on taxes and interest paid! Get into the investment mindset and you’ll find out Hawaii is ranked one of the lowest in property tax amount - 10 Best States for Property Tax. This reduces your monthly mortgage amount! It’s also best to speak with a tax professional about any taxes - don’t forget to ask them about the VA funding fee tax deduction when it comes time for taxes!
● Oahu has a strong housing market – Oahu has a strong housing market – Homes on Oahu continue to appreciate in value and that is largely due to the following unique aspects of living here – all 6 military branches are present on the island, tourism is strong all year, foreign investment, and space is limited on the island. Appreciating home values help military families make short and long-term gains.
● Utilities - Not included in your mortgage payment – however, homes with solar panels can greatly reduce your power bill. We can help you identify and find out what is included with HOA and maintenance fees.
● Pride of ownership - From the color of your paint to the more extreme, like a kitchen remodel, you are free to choose what to do in your space; just be sure to check with Hawaii Permitting department to find out if you need a permit. Maintain your home with helpful tips from Better Homes and Garden and request or Home Maintenance Planner.
● When it comes time to sell – Connect with us for ways to professionally prep your home. In this market, most homes sell quickly, but we can help you get more! If you have to rent your home, you will need to factor in property management fees, GET collected on rent received, and expense - here is a Guide to help you understand that.
Renting
● Repairs are not your responsibility – If something goes wrong in your rental property, it is up to your landlord to fix it. However, we have found that most items do not get fixed in a timely manner and there are no guarantees they will fix it back to the same condition as before.
● It’s easy to move - Ok, moving is never easy. But if you don’t like where you live, you can relocate once your lease expires. Be sure to compare rentals vs buying to see if the payment is near the same. Contact us for a customized rental search.
● Utilities - Most rentals, utilities are not part of the rent. Be prepared for the extra expense on top of the monthly rent charge, and the utilities must be in the tenants name
● High Deposits - You will have to come up with a hefty deposit. It is usually your first and last month’s rent up front. In Hawaii, – it is reasonable to estimate a minimum of $7,000, or more depending on the rent rate, to cover both payments.
● Pet friendly rentals - Finding a pet friendly rental on the island is challenging –we know pets are family too, but most rentals are not pet friendly in Oahu. Often, landlords don’t want to risk the potential damage of having pets on their property. If they do, it probably comes with a fee. Contact us to help you find a pet friendly rental.
● BAH is total loss - You have paid a landlord’s mortgage instead of your own and will have no tax benefits to claim. You may have also lost anywhere between $30,000 to $50,000 that year in BAH money paid out to the landlord instead of paid into your own home.
● Rentals go fast - The demand for rentals is so high that property managers prefer to deal with the prospective tenant directly. You will also need to submit rental applications, which can be costly if you are not selected! If you can’t find property manager info - we are glad to help locate that for you.
● Rent increases - If you have a 3 year PCS and plan to rent, count on the rental amount to go up when the lease renews. Your lease is also not an automatic renewal, so you might be looking for another place to rent.
Whether you choose to rent or buy, make the best decision for your goals. Do you want to become a homeowner and build wealth? Reach out for support - glad to educate and support you!
