Should you sell your house or rent it out when you PCS from JBLM?

Sec. 2, Landlord from afar

What being a landlord from your next duty station involves

A property manager does the daily work. You still own the decisions and the bills.

Houses around here need steady care. Roofs grow moss. Gutters and downspouts clog with fir needles and overflow in the first real rain. Crawlspaces collect moisture. A furnace that nobody services gives out in a cold snap. An older rambler can be a good rental, but someone has to catch the small problems before they become large ones, and you’ll be approving that work from Fort Drum or Korea, often across several time zones.

Some rules to know about before you commit:

• Washington’s Residential Landlord-Tenant Act sets requirements for deposits, notices, repairs, and entry. Some cities, Tacoma among them, add their own rental rules on top. A good manager knows these; ask how they keep up.
• Your homeowner’s policy generally won’t fit a rental. Call your insurance agent about a landlord policy before the first tenant moves in.
• If the house is in an HOA, as most of DuPont is, read the rules on leasing. Some associations restrict or regulate rentals.
• The VA’s occupancy requirement is about living in the house when you buy it. Renting it out after you PCS is common, but if you’re unsure, ask your loan servicer.
• If you receive Washington’s property tax exemption for disabled veterans, it covers only the home you live in, so renting the house out generally ends it. Tell the county assessor when the house becomes a rental. I explain the exemption itself in do disabled veterans pay property tax in Washington.

Sec. 3, Taxes

Taxes: the two-of-five-year rule and the military extension

This section is general. Your dates decide how it applies, so confirm with a tax professional who works with military families. MilTax, through Military OneSource, is a good place to start.

Federal tax law generally lets you exclude a large part of the gain on the sale of your main home if you owned it and lived in it as your main home for at least two of the five years before the sale. Once you move out and rent it, that five-year window keeps sliding, and at some point the exclusion can slip away.

Service members get an extension. If you’re on qualified official extended duty, which generally means stationed at least 50 miles from the house or living in government quarters under orders, you can elect to suspend the five-year period for up to 10 years. That can let you rent the house for a tour or two and still sell with the exclusion intact.

Renting also brings depreciation, and the depreciation you took (or could have taken) while it was a rental is generally taxable when you sell, even when the rest of the gain is excluded. On the state side, Washington has no income tax, but sellers usually pay the state real estate excise tax at closing. Your escrow officer can estimate that for you.

Sec. 4, When to sell

When selling is the cleaner answer

Selling tends to win when:

• the rent doesn’t cover the full cost of owning, with a cushion;
• you need your full entitlement to buy at the next station without money down;
• the house needs work you’d rather do once, before a sale, than keep doing between tenants;
• you’re close to the edge of the tax window and don’t qualify to extend it;
• you don’t want to be a landlord, which is a perfectly good reason on its own.

Keeping it tends to make sense when the numbers work and you expect to come back to JBLM, or plan to retire in the South Sound and would like a house waiting. If you’re reading this before you’ve bought here at all, the choice between on-post housing and buying is covered in on-post housing at JBLM versus buying off post, and it starts with this same question about leaving.

Sec. 5, Selling from away

How a sale works after you’ve already left Washington

Many sellers are gone before the house goes on the market, and the process is built for it. Listing paperwork can usually be signed electronically. Before you leave, we walk through the house together, in person or on video, and decide what’s worth doing: cleaning, touch-up paint, yard work, a repair or two. I coordinate those with vendors you approve, then handle photographs and showings with a lockbox on the door.

A vacant house needs a little care. Keep the utilities on and the heat set low through the wet months to hold down moisture. Call your insurer, because some policies change coverage when a house sits empty. Offers come to you by phone or video call, and you sign electronically.

Closing runs through an escrow company. A few documents, the deed among them, need a notary. You can use a mobile notary where you are, a notary at your installation’s legal assistance office, or a U.S. embassy or consulate if you’re overseas. A power of attorney can work too, but escrow and title need to approve it well ahead of time. When it’s time for proceeds to move, confirm the escrow company’s wiring instructions by calling a number you already know is theirs, never one from an email.

Sec. 6, VA assumptions

If a buyer wants to assume your VA loan

VA loans can be assumed by a qualified buyer with the loan servicer’s approval, which can appeal to buyers when your rate is lower than what’s available today. The buyer generally has to cover the difference between the price and your loan balance, usually in cash, and the servicer sets the pace, which can be slower than a standard purchase.

The catch is entitlement. Unless the buyer is an eligible veteran who substitutes their own entitlement, yours stays tied to that loan until it’s paid off, which can limit your next VA purchase. Make sure the assumption also releases you from liability on the loan, and ask the servicer how they document that release. The seller-side notes on the Battle Buddy home page summarize how I handle a sale from a distance.