Rent or Buy? 9 Potential Downsides of Home Ownership

By Carol Church

It’s a thrilling feeling to be handed the keys to a home you’ve just bought. A house can also be a great investment that will build wealth for generations to come. However, as most of us know, buying a home also has risks and downsides–perhaps especially so for active duty military, who may be relocating every few years. Still, it can be tempting for service members to believe that buying is always cheaper or more financially sound than renting.

Obtained from

So, what might service members want to keep in mind when making this decision, especially when the temptation of homeownership is calling? Here are nine reasons why service members may want to consider renting instead of buying, especially when on active duty:

  • You may not be able to live where you want.

Want to live in the best school system, or close to base? Enjoy a walkable area close to shops, or like living in downtown? It may be financially impossible to buy in these desirable areas, or houses may come up for sale only rarely, with major bidding wars. Renting is likely to be far more feasible.

  • You’re on the hook for maintenance and repair.

Once you buy a home, every clogged toilet, broken dishwasher, and leaky roof is on you. It’s not that potential homeowners don’t know this—but have they really thought about the costs? Experts advise homeowners to expect to spend from 1 to 4 percent of a home’s value per year on repairs and maintenance, but it can be much more at times. And if you’re on a tight turnaround time to sell the home again, you may not recoup those costs.

  • There isn’t always a tax break.

Prospective homeowners are often excited by the idea of getting a tax deduction for mortgage interest. However, to qualify, you have to have a rather sizable mortgage, and you must itemize deductions. Even then, it’s the wealthiest people with the most expensive houses who typically do best here. (Families earning more than $100,000 a year receive the bulk of these tax benefits.)

  • Being a landlord is a drag—and expensive.

If you’ve had to move on but your old house has not yet sold, you may end up needing to rent it out in order to afford your mortgage payment. This is either a major investment of your time and skills, or a major investment of your money (to hire a property manager)…and sometimes both! Finding tenants, checking their qualifications, and coping with repairs, complaints, and possible nonpayment can be a real nightmare. And depending on what the housing market is doing, you may still lose money.

  • You may be in trouble if your credit is poor.

Renters with poor credit may have trouble finding a landowner who’s willing to take a risk on them, but once that’s out of the way, the problem is over. But buyers with poor credit may have to accept a higher interest rate, meaning that they continue to pay for their mistakes, month after month.

  • Houses eat free time.

Being a homeowner can mean spending one’s free time at the hardware store or on fixing, building, mowing, and raking. For some this is fun, but for busy military families without a lot of regular free time, or with one member deployed, it can be tough. Maybe it would be nice to let someone else handle trimming the hedges?

  • The additional costs are nothing to sneeze at.

Even with a no-down-payment VA loan without private mortgage insurance, service members still need to have cash on hand for funding fees and closing costs. They’ll also need to pay property taxes and home insurance every year, and these costs may be substantial (and can rise unexpectedly).

  • You’re taking a risk, and tying up your money.

Many look at home ownership as a wise financial investment, and it definitely can be–but of course, this isn’t always the case. While the housing market has recovered substantially and continues to rebound, millions of American homeowners are still underwater, owing more than their home is worth. Though this may eventually work out for those who can stay in the home and regain equity, it can be a disaster for those who need to move on. Furthermore, consider what you could have been doing with the money that you put into that home purchase (fees, down payment, maintenance, insurance, monthly payment, etc.) Could it have been invested in a high-yield vehicle that would also have been little to no trouble to maintain, with lower risk?

  • You may be rushing into things.

It can be overwhelming to try to buy the right home in a new and unknown city in a short period of time, and sometimes the choice you make is not the financially or practically sound one. This can be a problem for any homebuyer who is relocating, but it may feel especially acute for military families who have a lot to deal with in a short time when PCSing. With renting, the risks are greatly reduced—you won’t be stuck with a “lemon” that you’ll have to unload later.

With all this said, there is, of course, a time and a place to buy a new home. When that time arrives, there are many great resources out there to help. Search MFLN for the “buying a home” tag to read more about the ins and outs of buying a home when in the military.



Setting Financial Priorities

By Dr. Jennifer Hunter

Dr. Jennifer Hunter

Welcome back to Money Moment episode #7 with your host, Dr. Jennifer Hunter. Today the topic is setting financial priorities.

Most people would agree that financial security is an important goal to achieve, however most people would probably also admit they do not have a clear idea of how to attain financial security. Many people go through their financial lives doing their best to meet daily financial obligations without setting aside time to think about and plan for long term financial goals. In order to make financial security a reality, you need to take the first step of setting financial priorities.

Identify your goals

Simply stated, the first step is to figure out what it is that you want. Setting financial priorities is about using what you have to get what you want. You must first identify goals that are personally relevant or important to you and your family. Do not be afraid to identify goals that will challenge both you and your family.

Encourage your entire family to get involved. Your partner and your children can all be involved in identifying goals that are most important to your family. Additionally, the possibility of achieving these goals is increased when everyone is involved in what the goals are and invested in making them a reality.

Make a list
Write down your financial priorities. These priorities can range from paying off your debts to establishing a college fund for your children. After you have listed your priorities, you want to categorize your financial priorities. It is likely that your list could be quite lengthy. In order to make the list more manageable it is useful to categorize your priorities into short-, medium- and long-term goals.

Short-term goals are those that can be reached within the next 6 months to one year, e.g. saving toward a family vacation. Medium-term goals can typically be accomplished within 1 – 5 years, e.g. saving for a down payment on a car. Long-term goals require more time and likely be achieved in 5 or more years form now. An example of a long-term goal could be funding a child’s education or saving for a down payment on a house.

Rank and research your list

Rank your list in order of priority. This can be difficult because financial priorities often overlap. Ask yourself which goal will cause the greater harm if it is delayed. Remember, putting off a goal for a while does not mean that you are abandoning the goal.

You will most likely need more information in order to figure out how to best meet your goals. For example, if your financial priority is to retire by the age of 62, you may need to do some research to determine how much money you will need to save before retirement in order to live comfortably.

Revisit your list often

Once you have set your financial priorities, your job is not over. It is helpful to keep your list in an easily accessible location and revisit it frequently to ensure that you are staying on track. A critical part to sticking to your financial priorities is making sure that you are controlling your spending and emphasizing saving.

It is best to plan on revisiting your list whenever you are evaluating your budget. Especially when saving for short-term goals, it is useful to put that list on the refrigerator, or the door into your laundry room or garage. Put it in a place where is will serve as a daily reminder of what you are working toward.

Setting financial priorities may seem overwhelming, however by following the steps discussed, you are one step closer to making those priorities a reality. Keep in mind that it is ok to adjust your financial priorities as needed. Financial priorities should be taken seriously but should also adapt to you and your family’s changing needs

Join us for the next Money Moment podcast episode about summer boredom busters on a budget.