What Should You Do With Your Home When You Get PCS Orders?

Quick Answer: Your PCS real estate decision depends on equity position (under 20% equity typically favors selling), assignment length (3+ years favors keeping as rental), and tax implications (2-year primary residence requirement for capital gains exclusion). Run the rent-vs-sell analysis BEFORE listing: calculate break-even rent, project appreciation, and factor in landlord responsibilities. Most wealth-optimized PCS moves involve keeping properties with strong rental fundamentals, not panic-selling into PCS timelines.

Discuss your PCS situation: Book a free call at https://askweldonhobbs.com (USAFA grad, 20+ years helping military families nationwide)

As a United States Air Force Academy graduate who's navigated military transitions personally, I understand both the emotional and logistical complexity of PCS moves. In my 20+ years helping hundreds of military families navigate PCS real estate decisions nationwide, I've worked as a Certified Financial Coach coordinating strategy with CPAs and financial advisors. I'm Weldon Hobbs, and I've learned that families who analyze the complete financial picture before PCS-ing build 3-5x more wealth through real estate than those who automatically sell.

PCS orders create decision pressure—but strategic thinking preserves wealth.

The 4-Variable PCS Real Estate Decision Framework

Your keep-or-sell decision balances equity position, assignment length, rental market fundamentals, and tax strategy. Run the analysis systematically.

Variable 1: Equity Position (The Financial Foundation)

Your current equity determines whether you CAN keep the property and whether you SHOULD.

Equity Threshold Analysis:

• Under 10% equity: Selling usually required (can't qualify for new mortgage AND keep old)
• 10-20% equity: Borderline (depends on debt-to-income ratio and new home cost)
• 20-30% equity: Strong rental candidate (can qualify for new mortgage)
• 30%+ equity: Excellent rental position (equity provides safety margin)

Equity Calculation:

• Current home value: $320,000
• Remaining mortgage: $240,000
• Current equity: $80,000 (25%)
• Can you qualify for new mortgage? Yes (25% equity provides cushion)

DTI Impact on Qualification:

• Lenders count rental property mortgage as debt
• 75% of projected rent can offset mortgage payment
• Must meet DTI requirements with both mortgages
• VA loans allow up to 60% DTI with compensating factors

I've worked with military families who had 15% equity and attempted to keep their home as a rental—only to discover they couldn't qualify for a new VA loan because their DTI was 58% with both mortgages. Know your numbers before PCS orders arrive.

Variable 2: Assignment Length (The Timeline Factor)

Your tour length dramatically affects the rent-vs-sell calculation.

Assignment Length Guidelines:

• 1-2 years: Selling usually optimal (appreciation unlikely to offset transaction costs)
• 3-4 years: Rental becomes viable (long enough to build equity + appreciation)
• 5+ years: Strong rental candidate (time for market cycles + equity growth)
• Permanent duty station: Rental portfolio building opportunity

Break-Even Timeline Calculation:

• Selling costs: 7% of home value ($22,400 on $320K home)
• Annual appreciation needed to offset: 2.3% minimum
• Historical military market appreciation: 3-5% annually
• Break-even point: 18-24 months typically

Unknown Assignment Length Strategy:

• If orders don't specify length, assume 3 years minimum
• Remote assignments often extend beyond initial timeline
• Career broadening tours typically 2-3 years
• Command tours typically 2-3 years

PCS real estate decisions require both strategic clarity and understanding YOUR timeline. I've helped hundreds of families through this transition nationwide. Book a free 30-minute Transition Strategy Call to discuss your specific situation—I'll help you apply this framework and connect you with an expert in your market.

Variable 3: Rental Market Fundamentals (Cash Flow Analysis)

Strong rental markets make keeping properties viable. Weak rental markets force selling regardless of equity position.

Rent-to-PITI Ratio Analysis:

• Calculate total PITI (Principal, Interest, Taxes, Insurance)
• Research market rent for comparable properties
• Strong rental: Rent covers 110%+ of PITI (positive cash flow)
• Viable rental: Rent covers 100-110% of PITI (break-even)
• Weak rental: Rent covers under 100% of PITI (negative cash flow)

Example Calculation:

• Monthly PITI: $2,100
• Market rent: $2,400
• Rent-to-PITI ratio: 114% (strong rental)
• Monthly cash flow: +$300
• Annual cash flow: +$3,600

Additional Rental Costs to Factor:

• Property management: 8-10% of monthly rent ($200-$240)
• Maintenance reserve: 1% of home value annually ($3,200)
• Vacancy allowance: 5-8% annually (0.5 months vacant)
• Capital expenditures: HVAC, roof, appliances (budget 10% of rent)

True Cash Flow After Expenses:

• Gross rent: $2,400/month
• Property management: -$240
• Maintenance/CapEx: -$300
• PITI: -$2,100
• Net monthly cash flow: -$240 (negative, but equity building + appreciation)

Many military families see "$2,400 rent vs $2,100 mortgage" and assume profit—forgetting property management, maintenance, and vacancies. Run the COMPLETE cash flow analysis.

Variable 4: Tax Strategy (Capital Gains Implications)

The capital gains exclusion requires 2 of past 5 years as primary residence—PCS timing matters.

Capital Gains Exclusion Rules:

• Must occupy as primary residence 2 of past 5 years
• Single filers: Exclude up to $250,000 gain
• Married filing jointly: Exclude up to $500,000 gain
• Military exception: Can suspend 5-year test up to 10 years during qualified service

Military-Specific Exception:

• Extends 5-year window up to 10 years if on qualified official extended duty
• "Qualified official extended duty" = stationed 50+ miles from home
• Can suspend 5-year test multiple times (multiple PCS moves)
• Must still meet 2-year occupancy requirement

Tax-Optimized PCS Timing:

• Lived in home 1 year before PCS: Keep as rental, have 9 years to sell tax-free
• Lived in home 2+ years before PCS: Can sell immediately tax-free OR keep as rental
• Bought right before PCS (under 2 years): Selling triggers taxable gain

I've worked with military families who bought homes 18 months before surprise PCS orders—then sold and paid $15,000 in capital gains tax because they didn't meet the 2-year occupancy requirement. The military exception extends the 5-year window but doesn't eliminate the 2-year occupancy requirement.

The Strategic Decision Matrix

Combine all four variables to make your keep-or-sell decision:

Strong KEEP Indicators:

• 20%+ equity (can qualify for new mortgage)
• 3+ year assignment (time for appreciation)
• Rent covers 100%+ of PITI (positive or neutral cash flow)
• Strong rental market (military base nearby, growing area)
• Already met 2-year occupancy (capital gains exclusion secure)

Strong SELL Indicators:

• Under 15% equity (DTI challenges)
• 1-2 year assignment (insufficient appreciation time)
• Rent covers under 95% of PITI (negative cash flow)
• Weak rental market (declining area, low demand)
• Under 2 years occupancy (selling triggers capital gains tax)

Common PCS Real Estate Mistakes

Mistake 1: Auto-Selling Without Running Numbers

Families panic and list immediately, missing rental wealth-building opportunity.

Mistake 2: Keeping Property With Negative Cash Flow

Hoping for appreciation while bleeding $400/month erodes wealth quickly.

Mistake 3: DIY Property Management From Overseas

Managing rentals remotely without professional help creates disasters.

Mistake 4: Ignoring Capital Gains Timing

Selling at 18 months occupancy costs $20K+ in unnecessary capital gains tax.

Key Takeaways

1. PCS real estate decisions balance equity position, assignment length, rental fundamentals, and tax strategy
2. 20%+ equity typically required to qualify for new mortgage while keeping old home
3. 3+ year assignments favor keeping property; 1-2 years favor selling
4. Rent must cover 100%+ of PITI for viable rental (factor in management, maintenance, vacancy)
5. Military exception extends 5-year capital gains window to 10 years but doesn't waive 2-year occupancy
6. Run complete cash flow analysis including property management (8-10%), maintenance (1% of value), vacancy
7. Professional property management essential for remote landlording (worth the 8-10% cost)

Ready to Apply This to Your Situation?

While this framework gives you the strategic foundation, your specific circumstances deserve personalized guidance. Whether you're facing PCS real estate decisions anywhere across the nation, I'm here to help you think through the complete strategy.

Here's how the free 30-minute Transition Strategy Call works: We'll identify which of the 12 major life transitions you're navigating, map out how to optimize for wealth outcomes by coordinating with your CPA/attorney/financial advisor, then figure out if real estate makes sense right now—and if so, exactly how to execute.

If you're not in Colorado Springs, I'll connect you with a transition-focused real estate professional in your market through my curated nationwide network.

[Book Your Free Transition Strategy Call] → https://askweldonhobbs.com

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