Renting vs. Selling Your House Before Deployment

Frequent deployments are often a part of military life. If you’ve received your deployment orders and you own your home, you may be left wondering what to do with it. Two of the most common choices are to sell the home or rent it out for extra income.

This is not an easy decision and usually depends on each service member’s situation. Here’s a look at some of the important factors you’ll want to consider before selling or renting your home.

Pros of Renting Your Home While Deployed

Second Income

Renting your home allows for an extra source of income. If you’re able to find a reliable renter, this could help offset the cost of your mortgage and possibly provide some extra money.

Build Equity

If you’ve only owned your home for a short period of time, it might not make sense to sell. In this case, it may be more beneficial to continue building equity by renting it out, especially if you will be deployed for an extended period of time.

Protect Your Property Value

While the exact value of your home is subjective, it's important to know that a drop in property values could make renting more beneficial than selling.

If your home's value has decreased since you purchased it, it may be worth considering renting it out until home prices start to bounce back. Waiting for the market to be more favorable can be a great way to maximize your home sale proceeds when you are ready to let go of the property.

Pay Off Your Mortgage Faster

Cons of Renting Your Home While Deployed

You’ll be a Landlord

Renting your home while in the military isn’t always easy. If you’re going to lease out your home, you’ll need to take care of your tenants, which requires time and effort. In the long run, you may find this does not fit into your active-duty schedule.

Property Upkeep

Even if you do your due diligence vetting renters, there will inevitably be some repairs, maintenance and damages to the property. It’s important to have everything sorted out on who will handle any necessary repairs. As an active-duty military member, there’s a chance that you won’t be able to handle tenant requests right away. If you plan to rent, make sure there’s someone else who can take care of the property when you’re not available.

Property Management Companies

If you decide to rent out your home while you're deployed, you may consider hiring a property management company. A property management company can be a great way to mitigate some of the time constraints and property work that comes with renting your home. However, doing this will ultimately cut into your profits to pay the company.

Unexpected Costs

In addition to unexpected emergencies like a burst pipe or a broken toilet, you may also have to deal with various fees and liabilities that you hadn’t accounted for. This could include the cost of evicting tenants and covering the mortgage payment if your home ends up being vacant for any length of time, especially if your deployment ends up lasting longer than expected.

Pros of Selling Your Home Before Deployment

Cash Out the Equity on Your Home

There’s something to be said for keeping things simple. Selling your home allows you to take out any equity you’ve built up in addition to pocketing the BAH you receive while you’re deployed. It also saves you the trouble of finding someone to take care of the home while you’re gone

No Property Management

One of the benefits of selling your house instead of renting while you're deployed is that you won't have to worry about managing a property with tenants. This can be a great relief in terms of stress and time, especially if you're deployed to a location that's far from your current home.

Home Sale Exclusion

If you decide to sell your home before deployment, you may qualify for the home sale exclusion. This allows you to exclude up to $250,000 of profit from your income taxes if you file as a single taxpayer or up to $500,000 if you file a joint return with your spouse. Keep in mind this only applies if you’ve kept the home as your primary residence for at least the past two years.

VA Loan Assumption

A VA loan assumption allows another borrower to take over payment of your existing mortgage, even if they aren’t a Veteran, active military service member or eligible surviving spouse. This option could potentially save you money and make your home more attractive, resulting in a faster sale or higher price.

Cons of Selling Your Home Before Deployment

You Could Potentially Lose Money

When you sell your home, you're losing an investment opportunity. Even if you find a buyer quickly, you'll only get the current market value of the home — which may not be what you could make by selling it in the future. If your home is worth less than what you owe on your mortgage, it's possible that selling won't even cover your outstanding balance. In this case, selling would actually cost you money.

It Could be a Lengthy Process

If you’re in a time crunch before your deployment, selling your home may not be the best idea. Depending on the current market conditions and the area where you live, getting a quality offer on your home might take longer than expected.

You Could Lose Your VA Loan Entitlement

If you used a VA loan to purchase your home, your VA entitlement will be tied to the property until you repay the loan in full. However, if you end up selling the home for less than you originally paid for it, this could affect your ability to restore your entitlement.

However, short selling your home before a deployment is not recommended. You’ll still be receiving BAH plus any additional deployment pay throughout the time you’re away. In this case, it’d make more sense to keep the home unoccupied if renting isn’t an option.

You Will Need to Go Through the Homebuying Process Again

If you want to sell your home before deployment, you should be aware that you'll need to go through the homebuying process again once you come back. It could be difficult finding an affordably priced home that meets your needs, especially if you're not familiar with the current market conditions. You may also find that you're not able to get the same interest rate on your new home that you had on your previous home.

Finding a home and getting approved for another mortgage is not something that should be rushed. That being said, if you decide to sell your home before deployment, you’ll need to plan where you’ll be living once you return.

Ultimately, determining whether to sell or rent your home depends on the homeowner’s situation. As you begin preparing for deployment, take the time to think through each of these pros and cons, weighing them carefully before making your final choice.