Receiving Permanent Change of Station (PCS) orders to Hawaii is an exciting opportunity, and many military members consider purchasing a home instead of renting. One of the most common questions I get is: Should I use my Basic Allowance for Housing (BAH) to help pay for a mortgage?
As with any real estate decision, there’s no one-size-fits-all answer. The right choice depends on several factors, and I always start by asking military buyers a few key questions.
How Long Will You Be Stationed in Hawaii?
If your PCS orders indicate you’ll be here for less than three years, I typically recommend against buying a home. Why? Because with Hawaii’s high home prices and the interest rates higher than they were around 3 years ago, there’s a real possibility of being upside down on your mortgage when it comes time to sell. This is especially true if you use your VA loan entitlement with zero down payment—meaning you won’t have built much equity in a short period.
Another consideration: Are you working toward a promotion that could result in a transfer sooner than expected? If there’s a chance you could be reassigned in under three years, renting or living in military housing may be the safer option.
Can Your BAH Cover Your Entire Housing Cost?
BAH can be a great tool to help with homeownership, but in Hawaii, it may not cover everything—especially when factoring in:
✔️ High home prices and mortgage rates
✔️ HOA and maintenance fees (common with condos and townhomes)
✔️ Utilities and other expenses
If you’d have to pay out of pocket beyond your BAH to cover your mortgage and home expenses, it’s important to determine if you’re financially comfortable with that commitment.
What If You Need to Rent Out Your Home?
Some military buyers think, “If I PCS early, I’ll just rent out my home.” While this can be a great option, it’s important to understand the additional costs that come with being a landlord in Hawaii:
- Property Management Fees – Most property managers charge around 10% of the monthly rent to handle tenant placement, maintenance coordination, and rent collection.
- General Excise Tax (GET) – Hawaii requires landlords to pay a 4.5% tax on rental income.
- Possible Negative Cash Flow – If the rent you charge doesn’t fully cover your mortgage, HOA and maintenance fees, and other costs, you may have to cover the difference out of pocket. Also, keep in mind that HOA/maintenance fees increase every year.
- Vacancy Costs – If your home sits vacant between tenants, you’ll still need to cover your full mortgage, HOA fees, and utilities.
Renting can be a solid backup plan, but it’s crucial to run the numbers ahead of time to avoid unexpected financial strain.
Alternative Options
If buying isn’t the best option for you right now, consider:
✔️ Renting or living in military housing until you’re more settled
✔️ House hacking (buying a multi-unit property and renting out a unit)
✔️ Purchasing with a long-term investment mindset (e.g., planning to rent the home out after your PCS)
Final Thoughts
Buying a home in Hawaii can be a great opportunity for military members, but it’s not the right move for everyone. If you’re considering homeownership, let’s chat! I can walk you through the numbers, financing options, and potential resale or rental strategies to help you make the best decision for your situation.