There are many reasons why being in the military can be one of the best jobs for people hoping to invest in real estate.
Savings Rate
When you join the military, you have already almost attained level one of financial freedom. All of a sudden, your housing is provided, food is paid for, health insurance is covered, dental is covered, life insurance is provided, and almost all of your large expenses are eradicated.
Not only that, but you have the benefit of the Service Member Civil Relief Act (SCRA). The SCRA requires all lenders to cut the interest rates of any debt you had prior to enlisting down to 6%. This further decreases your required expenses, which is a huge benefit to you.
This lack of expenses allows you to increase the amount of money you can save with each paycheck. We call this your savings rate. The higher your savings rate, the faster you can amass wealth by investing that extra savings intelligently.
Community
Joining the military is like joining a fraternity. You will have an instant connection with anybody that served in the military, and this bond will help you find quality people in your network to work with.
I love doing business with other service members and veterans. Having an instant rapport with potential business partners is great.
Obviously, not all veterans or companies who “specialize in working with veterans” have your best interests at heart. More often than not though, military real estate investors and business owners stick together.
Basic Allowance for Housing
Close your eyes and imagine that somebody gave you an untaxed allowance for housing.
Oh wait, that is exactly what the military does. Basic Allowance for Housing (BAH) is a very powerful benefit if used to your advantage.
As of this writing, I am stationed at Camp Pendleton, California, and live in Oceanside. My current housing allowance is $3,185/month, and I’m paying $3,000 in rent. After utilities and expenses, I pay about $3,500-3,600/month for my housing. But I am able to rent out two bedrooms and get to save $1,500-2,000/month from my housing allowance.
If I were going to be stationed here for a longer period of time, I would have purchased a two- to four-unit home and been able to save even more of my housing allowance.
My first purchase was a duplex that cost me around $150/month after my tenant paid their rent. My housing allowance was $850/month, and I got to keep the remaining $700/month.
You have to use your BAH to live somewhere, so why not use it to buy a house hack and build your savings for larger investments?
Don’t get me wrong, I believe that buying a house at every duty station is bad advice. Not every market makes sense for you to purchase a property. Make sure you buy an investment, not just a house.
Regular Change of Station
Every two or three years, you move across the country or world. You can look at this in a positive light or a negative one, but it will happen. I choose to think of this in a positive light, and you absolutely should too.
Relocation forces you to familiarize yourself with different markets. Somebody born and raised in Hawaii, California, or New York might find real estate investing a daunting task. If that person relocated to the Midwest, however, it would seem much more feasible. Likewise, somebody born in the Midwest could be introduced to the hustle and bustle of large cities and their market variances.
This increases your education and opens the door for you to pick the best market(s) in which to invest. Also, relocating allows you to utilize the VA loan more than once, and that is a great opportunity.
Related: Investing in Real Estate While Serving in the U.S. Military
Long-Distance Investing
Long-distance real estate investing is scary, but being forced to invest in real estate from a distance can be a blessing.
When you house-hack or live in the same town as your rentals, it is easy to check on them. Even if you have a property manager, you will be tempted to drive by them, talk to the tenants, look at what ugly plants they have outside, etc. That means you will, inevitably, be spending more time on your rental properties than necessary. It is just human nature to inspect what you own and want to ensure things are going well.
Long-distance real estate investing forces you to have systems in place. You must have a solid property manager, realtor, lender, contractor, and others because you aren’t there to oversee the properties. That means you will be more diligent in the hiring process and strive to build a team of rockstars.
Having my team in place and being 6,000 miles away means that I physically cannot check on my real estate. As a result, I own truly passive real estate investments. The first 13 units I bought have only taken three hours of my time this quarter. Once a month I receive a report, and then I input the numbers into my accounting records. That is the only attention I pay to these deals.
I never would have been able to pay so little attention to these properties if I lived nearby. Thank goodness for systems and long-distance military real estate investing.
VA Loans
The VA loan is potentially the greatest benefit service members receive. As a military real estate investor, you can use the VA loan to buy a one- to four-unit home as your primary residence.
You can do this without paying a single penny out of pocket. I call this strategy the VA house-hack.
Let me say that again: you can buy a four-plex without putting any money down.
The VA loan allows a young (or old) service member to get started in real estate investing without having a large amount of cash saved. This is one of the reasons that military real estate investing is so effective.
Best used in affordable markets, theVA house-hackwill purchase up to four units and allow your tenants to pay the mortgage. This will allow you to save a large portion of your basic allowance for housing (BAH) to build investment capital.
I could go on and on about the VA loan, but instead of rewriting all of these benefits, check out my other two articles.
Military Tenants
Another benefit is that military cities are generally pretty stable investment markets. You will have a constant influx of military tenants to rent to, in addition to many other pros and cons of investing near military bases.
I’m a fan of renting to military tenants, but make sure you understand the nuances that apply when you do so.
Military Discounts
As much as I find it tacky to walk around asking everyone about military discounts, there are a lot of organizations that do offer them, and it is very worth your time to discover who those companies are. Lowe’s, for example, gives a 10% military discount. If you are renovating properties, a 10% discount will add up extremely quickly!
Do your homework in the area and figure out what discounts are available to you. Ten percent off the bottom line is a lot of additional profit in your pocket.
Related: Point-Counterpoint: 6 Pros of Investing Near Military Bases
Summary
I could go on and on and on about life as a military real estate investor, but suffice it to know that you have a lot of advantages.
There are downsides too, but don’t focus on those. Focus on your benefits and advantages and then play into those strengths. Together, the military real estate investor community will continue to thrive and help create financial freedom for our brothers and sisters.
What do you think the best day job for aspiring investors is?
Let us know in the comments below.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
As a seasoned real estate investor and military enthusiast, I can attest to the unique advantages that military service offers to those aspiring to invest in real estate. My firsthand experience in the military has provided me with insights into the financial benefits and opportunities that can significantly contribute to building wealth through real estate investments.
One of the key advantages highlighted in the article is the Savings Rate. When you join the military, you enter a realm of financial stability where housing, food, health insurance, dental, and life insurance are covered. Additionally, the Service Member Civil Relief Act (SCRA) ensures that lenders reduce the interest rates on pre-enlistment debts to 6%, further easing financial burdens. This lack of substantial expenses enables service members to achieve a high savings rate, a critical factor in amassing wealth through intelligent investments.
The sense of Community within the military is another invaluable asset. Joining the military is akin to joining a fraternity, fostering an instant connection with fellow service members. This bond extends beyond the service period and can be leveraged to build a network of quality individuals for real estate collaborations and partnerships.
The Basic Allowance for Housing (BAH) is a powerful benefit that can be strategically used in real estate investment. The untaxed allowance for housing provides an opportunity to generate additional income by renting out surplus space or investing in properties that align with the BAH. The article provides a personal example of utilizing BAH to offset housing expenses and generate savings for further investments.
The Regular Change of Station, a routine aspect of military life, is presented as a positive force for real estate investors. Relocating forces individuals to familiarize themselves with different markets, increasing their education and allowing them to choose the best markets for investment. Additionally, it enables service members to utilize the VA loan multiple times, presenting a valuable opportunity for building a real estate portfolio.
Long-Distance Investing is highlighted as a challenge that turns into a blessing for military real estate investors. Managing properties from a distance forces investors to establish efficient systems, relying on a solid team of property managers, realtors, lenders, and contractors. This results in truly passive real estate investments, as the investor can't physically check on properties regularly.
The article emphasizes the significance of VA Loans, describing them as potentially the greatest benefit for military real estate investors. The ability to purchase a one- to four-unit home as a primary residence without putting any money down is a game-changer, allowing service members to enter real estate investing without a large cash reserve.
The presence of Military Tenants in military cities is considered a stable and advantageous factor for real estate investments. The constant influx of military tenants provides a reliable rental market. Additionally, the article mentions the availability of Military Discounts, emphasizing the financial benefits of exploring discounts offered by various organizations, such as Lowe's, for property renovations.
In summary, the article provides a comprehensive overview of the various concepts associated with real estate investing for military personnel. From financial advantages and community connections to strategic use of benefits like BAH and VA Loans, the military offers a unique platform for individuals to thrive as real estate investors.
