March 25, 2022

Do you have orders to Northern Virginia and you're curious whether you should buy or rent?

In this episode of Give, Work, Play, I’m going to help you figure out whether to rent or buy if you’re military or a government employee that will only be in the area for two or three years. We’ll consider location, housing costs, and your BAH so you can make the right choice for you.

Living On Or Off Base

Stafford County is a great place to live, work, and play, whether you're only coming here for three years or are retiring from the military and want to stay. My team and I have worked with hundreds of military families and government employees who have moved here, not only for Quantico, but for Belvoir, the Pentagon, and the Dahlgren area. Typically, the first question I get asked is, ‘Should I buy or should I rent?’

One of the first things that military families consider is whether they should live on base, rent off base, or potentially even buy. I like to advise clients to take a look at what their BAH is and what lifestyle of living they really like. Do you like living on base and being part of that military community? Do you want to live in a townhouse? Or would you prefer to be in a single-family home that's about 10 miles away from the main gate? Are you looking to live where you can have some property and make your home your home? Do you have pets?

I'm always telling people to think about what's most important to them in the lifestyle and the way that they want to live. Whether proximity to school is a concern or the commute to work is important, all of these things will factor into whether you decide to live on base, buy, or rent.

Rental Options In Stafford

If you decide you don't want to live on base, let's explore what your options are living off base. First, we’ll look at what the average rent is for single-family homes and rentals. We’ll also find out what you might pay in a mortgage payment for those same single-family homes and townhouses.

Let’s first discuss the Stafford rental market. If you're looking at renting a single-family home with four bedrooms, three bathrooms, and an attached two-car garage, you're probably looking at about $2,500—or maybe a little bit more—per month in rent. If you're looking at a townhouse to rent, the average three-bedroom, two-bath townhouse with or without a garage will be around the $2,100 mark.

Rental Options In Fredericksburg

Now that you understand the Stafford rental market, let’s move over to Fredericksburg, Virginia, about 10 miles south. Fredericksburg is pretty much right smack in between DC and Richmond, with a lot of military that selecting Fredericksburg as their location of choice. This is because it still has a great commute to Quantico or even to Dahlgren, which is a little bit further south.

Fredericksburg is rich in history, and you're sure to fall in love with the downtown area’s cobblestone streets and the walkability factor. There are also numerous shops and dining options available as well. As far as rentals go, the average four-bedroom, three-bathroom house with a two-car attached garage is going to run you about $2,100 a month in rent.

When we look at the rental market for townhomes in Fredericksburg, there’s a really interesting thing. It's just the beginning of 2022, and the three-bedroom, two-bath with or without a garage in rent is right around $2,000. It's really close between the single-family and the rental market for the townhome, which is crazy.

Buying With Your BAH

An E3 through an E6 receives just over $1,900 a month for BAH with dependents. You may be thinking, ‘Can I purchase something for my BAH at $1,900 a month—and is it even worth it?’ Let's take a look at an example to answer this question.

We’ll use $400,000 as the baseline example; in Stafford, the average sales price is closer to $450,000 and in Fredericksburg, it’s a little bit under $400,000. Currently, in the beginning of 2022, the average interest rate is a little bit high for a VA loan at 4.25%. For a sales price of $400,000, the average mortgage payment would be right around $2,100. This is taking into consideration taxes and an average insurance cost.

If you take that same home and rewind the clock back to 2018, that interest rate would have been a little bit higher and that payment would have been a little bit over $2,400 a month. It's a great time to buy right now because interest rates are a little bit lower, and you're going to get more for that dollar and build equity faster.

The Expense Of Renting

So let's go back to that $1,900 for what a BAH could be. If you had that amount and are buying a $400,000 house in today's market, that mortgage payment will be $2,100. How much of that, though, is really coming out of your pocket? Not that much.

If you were to rent in Stafford and Fredericksburg, the average rent is actually going to cost you more than $1,900 per month. This means you're going to be adding money to the rent—but you're not building equity in your future. Don't forget that there are other costs associated with renting a home, like application fees due for every person living in the home over the age of 18. Those average right around $50 per person and are non-refundable.

In addition to that, if you have a pet or two or three, you're going to have a non-refundable pet deposit. With a pet, you also might incur additional expenses once you're moving out. And don't forget, not only are you going to need your first month's rent but there's usually a security deposit that's equivalent to one month's rent in addition. As you can see, there are a lot of upfront expenses you need to be prepared for when you're renting.

Building Equity

With all of this information, is it better to buy or is it better to rent? I'm going to say it's probably better to buy, especially if you're planning on being here for a couple of years. You may also want to hold it as an investment opportunity and then turn around and become the landlord. You can then rent it out to the next person coming to Stafford or Fredericksburg, as this will help you build equity in your future.

To be fair, when you're buying a home there are some additional expenses that you do need to be prepared for. If you're doing inspections and you're going to have an appraisal, you’ll need a little bit of out-of-pocket money before you purchase the home. The beauty of the VA loan, as you probably know, is that you have the potential eligibility of 100% financing as well as no PMI insurance—which is a bonus when you're using that VA loan.