We've talked about why it made more sense to purchase rather than renting a home. If you're an active-duty military member, that's even more true if you have access to the VA loan. If you add dependents to the mix, your BAH, Basic Allowance for Housing, could be as high as in the $3,000 to $4,000 range, depending on where you're stationed.
There's a couple of ways you can use your BAH. The first way is just to sacrifice it, live on base, and not get it at all. It is highly recommended you don't do that. The second way is to take that BAH and use it to pay for a rental. It's another great way to make a landlord rich while not helping yourself as you're going through that process. Or you can use your BAH to purchase a home.
For example, we'll look a the O-2 BAH rate in San Diego, which is $3,177*. If you take that tax-free income and apply that to the purchase of a home, you're going to be able to afford a house that could be $750-800,000. The key to this is not having a lot of debt and your debt-to-income ratio pretty much only being your housing. That house owned over three-year orders in San Diego is going to net you $72,000 of net worth over three years.
Now let's say hypothetically, you can get two of your fellow military members to live with you. They pay you $1,000 of rent per month, per person. You can actually double that money and have $150,000 of net worth increase after spending your tour here in San Diego.
If you would like to see what your net worth could be from owning a home compared to renting take a look at our Rent vs. Own Calculator and see what the difference could be. If you're ready to purchase a home and start increasing your net worth, reach out to a Sentry Residential agent on our website, www.sentryresidential.com.
*O-2 BAH rate in 2020. For an accurate BAH rate chart click here