Article Credit: Karina Gafford-MilitaryByOwner staff writer
If you’re a military homeowner on the vulnerable move list, then chances are you’re already dreaming of what far distant pastures Uncle Sam may send you to next—Hawaii, Italy, or maybe just one state over. While you should find out where you’re headed next soon, don’t mentally check out of your current duty station just yet! If this is your first time completing a PCS as a military homeowner, you need to decide if you’re going to sell or rent; it’s always good to have an exit strategy for your property.
If you’re planning to sell, MilitaryByOwner has some useful seller resources that explain everything from how to get more money for your For Sale by Owner to how to sell a home someone died in. If you’re planning to rent your home, however, you can also find landlord resources that cover everything from tips for first time landlords to tax code implications for landlords. Regardless of whichever option you choose, it is time to get your finances organized. Even if you are planning to sell your home, know that you may need to also prepare to have your home as a rental. While 6-percent of homes this past year entered the enviable selling position of bidding wars while 35-percent of homes sold within one month, prepare for the worst case home selling scenario:
- 23-percent of homes receive less than 90-percent of their asking price.
- 10-percent of homes take more than a year to sell.
- Existing home sales this year are expected to fall below last year’s sales, according to the National Association of Realtors.
Beyond utilizing the resources already available on Military By Owner, there is one easy way to prepare for your summer PCS this winter: Open a new checking account! This account will now serve to manage all of the finances for your property. You are preparing to run your property as a business, so treat it as such; don’t co-mingle personal and business finances.
If you bank with most military banks, such as USAA or Navy Federal, you can easily open a new account online for free. Opening a new account usually takes about five minutes.
Once you’ve opened your account, the next few steps are just as simple:
- Give your account a nickname. Using either the street address of your home or the city in which your home is located in would work well. This will make sure you can easily identify the account.
- Transfer your mortgage payment. Contact your lender and set up a future date for which your mortgage will begin to deduct from your new checking account. Make sure to make a note in your calendar to transfer sufficient funds into that account if your property is not yet rented.
- Set up overdraft protection on your account. Again, this service is now free through many banks. Though not ideal, set up the overdraft to pull from either your checking or savings account (whichever is more likely to have funds available) for the off-chance that your tenants do not pay rent. After you’ve had this account for a year or two, you should have sufficient excess funds in the account to not require this service any further.
- Transfer personal funds into your new account. Take advantage of the time from now until your PCS to auto-draft some personal funds into your new account. Even if you can only afford $100 per month, switch that money over into your account to help provide you with a little buffer for maintenance costs and marketing your property.
- Plan for a rental payment direct deposit. If you have a property manager, she will likely have a direct deposit form; otherwise, you can get one from your bank to give to your new tenant to help make sure that rent deposits directly into your mortgage account.
Now, you have a rental property business account set-up in which expenses and income are managed in one location. You’ll be able to see at-a-glance whether rent was paid for your property, and whether you have sufficient funds in your account to prepare for future improvements on the property, such as replacing carpets.
You can later do the same when you have multiple rental properties, and you’ll never confuse funds for each. Your CPA will love you!
If you aren’t quite yet financially organized, don’t fret. We have 4 simple steps to organize your financial life. Start working on these, and then before you know it, you’ll be researching your next dream home on MilitaryByOwner!