As a current active duty military member who buys a house at every duty station I will give you my two cents. First, get to know the BAH rates. Not just for you, but for your target audience. When you leave, who do you intend to rent to? Are you looking for two or three E-4s or E-5s to rent your place or do you want an E-7 or O-3 family. Once you determine who you want to rent to after you leave, then you can start to work your numbers. One thing that is really nice about this method is it takes a lot of the emotion out of the deal very early on.
After you identify your target renter, look at the market and where you want to find a property. That will be driven by what commute you are willing to make and what commute you think your tenants will be willing to make. During this step, I would also reach out to folks at the base that you are joining. Ask them where the (insert your desired rank here) are living.
Once you identify your target area, start running the rental comps. Figure out what the average rent price is per bedroom, or square foot, to understand what sailors in the area are paying for housing. Keep in mind that there will be variables which will affect this number, i.e.: garage, yard, pool, etc... You can also reach out to a property manager for this step. I would avoid asking your real estate agent as they can be conflicted. Reach out to a property manager that you get recommended from BP and ask them how much you can assume to get in rent.
Now that you have identified the the best area to purchase, and rent comps in that particular area, you can work your numbers backward to figure out what you can spend in order to get into that area and still maintain your goals on the backside. There are things that you will want to consider when buying even though they won't be a factor until you leave. For example, you need to factor in a monthly property management fee. Even if you can't possibly imagine needing a PM, plan for it. It will cost you 8-10% of that monthly rent. Capital expenses are a big one that people usually forget. Plan for 10%. Does Jacksonville require an owner to pay any utilities? If so, factor that in.
Now that you have identified your target renter, target area, figured out what the rental comps will be, and worked your numbers backward to figure out what you can pay, you can start shopping for properties in that price range. What you need to remember, and I know this from experience, is that this should not be emotional. Many folks move to an area and want the perfect home in the perfect neighborhood etc... If this is truly an investment strategy for you, than there is no emotion. The numbers are the numbers. It has to work. You make money when you buy the property not when you rent it out, or when you sell it!
Good luck. Feel free to reach out for any further discussion.
I think you should look at this from a different angle. I don't know your rank, therefore I don't know your BAH. However, that is not the question. The question is what tenant group do you intend to target? Then, when you have identified that target tenant, do you want to get a mortgage for their entire BAH. The answer, for me, will always be no. The reason for that is because the mortgage PITI is only part of the cost of owning a rental property.
I think that most military members who rent are willing to utilize their whole, or most, of their BAH on housing. Therefore, I would be willing to get a property, where the rent will cover my mortgage PITI, all estimated repair costs, CAPEX, necessary utilities, PM fees, vacancy , and ultimately leave me with a certain amount of cash flow per month.
I will provide an example of what I mean. BAH rates are below for four groups of service members, all with dependents in the zip code 32256:
E-6(with dependents) $1680
E-7(with dependents) $1695
O-3(with dependents) $1716
O-4(with dependents) $1890
Ok, so now you know your rent payment. As I mentioned earlier, most service members will be willing to pay their entire BAH or most of it on housing. For this example, I will utilize a Navy Lieutenant with dependents. I now know the rent number, $1716 per month. For ease of calculation, I will use $1650 for what that Lieutenant would be willing to pay for rent. That gives them a little bit of money left over for utilities. Obviously, that won't cover all of their utilities, but most folks I have found, don't consider the utilities when they are determining their acceptable rent price.
Now you have to work backward to calculate the price of an investment property.
Rent received: $1650
Repairs: -$165
CAPEX: -$165
Vacancy: -$165
Property Management: -$165
Landscaping: -$50
Sewer:-$50
Insurance:-$100
Total Expenses: -$860
Now that you know how much your monthly expenses will be, you can figure out what you can pay for a house and still make a decent cash flow. What do you want your monthly cash flow to be? For this example I will use $100 per month. You now know that you need to get a mortgage that will cost you $690 ($1650 - all expenses ($860) - the cash flow you desire ($100) per month for the principal, interest, and taxes. Remember I already included insurance above.
The taxes for Jacksonville County are 1.29 of the assessed value. I will assume that the assessed value will be the same as the purchase price. I know this is not always the case but this is an assumption. I will also assume that you will get a mortgage rate of 4%. Again an assumption.
All of these things combined tell me that the target mortgage you are looking for will be $115,000 or less. That would put your principal, interest, and tax at $690.70.
Now the type of loan you are going to use will get you to that price. If you are using the VA loan with no money down, you can buy a house for $115,000. IF you are going to use an FHA loan, you can buy a house for $119,500. You will put a down payment $4200 toward the purchase. If you are going to use a traditional loan with 10% down, then you get buy a house for $128,000. That will require a down payment of $12800 and make your loan price $115,200.
I hope this helps. Let me know if I can provide anything else.
