Military BAH and Housing: Building Equity vs Renting

Every service member faces this question: should I pocket my BAH in a cheap rental, or use it to buy and build equity? The answer depends on your duty station, how long you'll be there, and your long-term financial goals.

Let's break down the real math.

BAH Basics: What You're Working With

Basic Allowance for Housing (BAH) is tax-free money designed to cover housing costs. The amount varies based on your rank, duty station, and whether you have dependents.

For 2026, BAH rates range dramatically:

• E-5 with dependents in Killeen, TX: ~$1,500/month
• E-5 with dependents in San Diego, CA: ~$3,200/month
• O-3 with dependents in Washington, DC: ~$3,600/month

That's tax-free. An E-5 in San Diego receiving $3,200/month would need roughly $4,000 in taxable income to have the same purchasing power.

The Rent vs. Buy Calculation

Traditional advice says don't buy unless you'll be somewhere for 3-5 years. But let's look at actual numbers.

Scenario: E-6 at Fort Liberty (Fayetteville, NC)

BAH: $1,800/month
Renting: $1,400/month for a 3BR
Buying: $280,000 home with VA loan

Renting for 3 years:

• Total rent paid: $50,400
• Equity built: $0
• BAH surplus pocketed: $14,400

Buying for 3 years:

• Monthly mortgage + taxes + insurance: ~$2,120
• Out-of-pocket beyond BAH: ~$320/month ($11,520 total)
• Principal paid down: ~$14,500
• Estimated appreciation (3% annually): ~$26,000
• Total equity built: ~$40,000

After 3 years of owning, you've built roughly $40,000 in equity while paying only $11,520 more than BAH covered. That's a net gain of about $28,000 compared to renting — assuming you can sell or rent the property when you PCS.

The math changes if the market dips or you can't find tenants. But military towns near major installations typically have stable demand.

How PCS Frequency Affects the Decision

If you're getting orders every 18-24 months, buying gets riskier. Closing costs (2-3% buying, 8-10% selling) can eat your equity gains on short timelines.

The breakeven point for most markets is 2-3 years. Less than 2 years, renting usually wins. More than 3 years, buying often comes out ahead.

You can influence your timeline:

• Some assignments offer 3-4 year tours
• Buying during school or staff assignments gives you longer runways
• If you buy where you'll eventually retire, the timeline becomes permanent

Building Equity Despite Frequent Moves

This is where the VA loan becomes your superpower.

VA Loan Portability

Your VA loan benefit isn't one-and-done:

1. Sell and reuse: Restore your full entitlement and buy again at your next station with zero down
2. Keep and rent: Convert your home to a rental and use remaining entitlement for your next purchase
3. Build a portfolio: Many service members buy at each duty station, keeping previous homes as rentals

Real example: An O-4 bought homes at three consecutive duty stations over 12 years, keeping each as a rental when they PCS'd. By retirement, they had three properties with ~$400,000 in combined equity and positive cash flow — all purchased with zero down.

When Renting Actually Wins

Buying isn't always the answer. Rent when:

• You'll be there less than 2 years: Closing costs will eat any equity gains
• The local market is overheated: Some military towns have inflated prices that don't pencil out
• You can pocket significant BAH surplus: If BAH is $2,500 and rent is $1,400, that $1,100/month invested might beat real estate returns

The key is running the actual numbers for your situation, not following generic advice.

Tracking Housing in Your Net Worth

Whether you rent or buy, housing has a massive impact on your finances. If you own, your home equity is a real asset — but only if you're tracking it accurately.

What to track:

• Current home value (update quarterly)
• Mortgage balance (decreases monthly)
• Net equity (value minus what you owe)
• Rental properties if you've kept previous homes

When you can see your home equity alongside your TSP, savings, and debts, you understand where you actually stand. That's critical during PCS season when you're making decisions that affect your net worth by tens of thousands of dollars.

Nova's net worth tracker handles real estate automatically — connect your mortgage and add your property value, and equity updates as you pay down principal.

Making the Decision

Here's a simple framework:

1. Calculate your breakeven timeline for the local market (usually 2-3 years)
2. Estimate how long you'll be at this duty station
3. Run the actual numbers for rent vs. buy in your specific situation
4. Consider your long-term plan — will you keep this as a rental or sell?

The VA loan gives military families an edge civilians don't have. Zero down payment and no PMI mean you can get into real estate without typical barriers. The question is whether your situation makes it worth using.

The Bottom Line

BAH is designed to cover housing costs, but how you use it shapes your long-term wealth. Service members who build equity strategically — even with frequent moves — often end up with significant assets by retirement. Those who always rent for convenience end up with nothing to show for years of housing allowance.

Neither path is wrong. But the decision should be intentional, based on math, not just what's easiest.

Start tracking your complete financial picture — including home equity, TSP, and everything that determines your net worth. When you can see all your assets in one place, the right housing decision becomes clearer.

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Nova Net Worth is a Service-Disabled Veteran-Owned Small Business built for military families. We understand PCS moves, deployments, and the unique financial landscape of military life.