There is no doubt that the military is a challenging profession. We work long hours, are often away from home for months on end, and operate in high-stress situations on a daily basis. Why then, would anyone think the military is a great career for real estate investors?
Ironically these are some of the exact reasons that military real estate investors have it so easy! We are used to working long hours, so looking for deals on the weekend is nothing to worry about! Being away for months forces us to create solid systems, and rely on them… making us more efficient investors! Finally, the high-stress situations we are used to create a sense of resiliency that allows us to think logically, rather than emotionally, when things go awry.
Every two or three years, service members relocate to a new state, or country. Although this sounds like it would hinder your ability to invest in real estate, it can actually help a lot!
Living in different markets will increase your chances of finding a market you like to invest in. Somebody who lives in San Francisco is going to find it difficult to invest locally (at least for cash flow)… whereas somebody in the Midwest might be able to cash flow with almost any purchase. For this reason it is an advantage to move around every couple of years to get to learn the ins and outs of investing in various markets. This affords you the opportunity to see what works in expensive markets, what works in affordable markets, and ultimately makes you a well-rounded investor.
David Greene’s book, Long Distance Real Estate Investing Makes a solid argument that technology is mitigating the challenges of investing out of state. Since investing out of state is no longer a scary subject, once you find a market you like it is possible to invest no matter where you get stationed!
All of my rental properties are in a market I was stationed in for three years. I never expected to live in Missouri, but here I am investing there because I liked the market and built a solid team while I was there!
2. VA loan
The VA loan is a primary residence loan, similar to the FHA loan, which allows you to purchase a house with 0% down!
The VA loan is only for military real estate investors (or home owners). This unique loan variant allows you to purchase a property without having to save 20% for a down-payment. Now, this is a double-edged sword, because you need to be careful to avoid over-leveraging. For this reason I recommend that you maintain a reserve fund as a buffer for maintenance expenses.
Keep in mind that buying a really nice house is not necessarily an investment. Use the VA loan intelligently, and don’t overpay for a property just because you aren’t required to make a down payment.
I love the VA house-hack strategy, and think this is one of the best advantages available to military real estate investors!
It is tempting, as a new investor, to catch “shiny-object syndrome.” New investors often fall prey to getting wrapped around an attractive property, and these emotions will help them justify it as a good purchase.
This is dangerous, and the reason that I often caution against looking at a property (or even pictures of a property) before running the numbers. You want to ensure the property is a good financial investment, before getting emotionally invested.
This is where discipline comes in… Successful investors adhere to strict purchasing criteria. They know what they are looking for, and refuse to deviate from their plans. The military does a great job instilling discipline in our minds and bodies.
Service members are generally better at ignoring their emotions, and acting logically based on pre-existing parameters. For this reason, we have an advantage when it comes to buying criteria and avoiding bad investments.
Basic allowance for housing (BAH) is a huge advantage the military affords service members. BAH is a monthly housing allowance that is adjusted for the cost of living in a given area. Service members automatically begin receiving BAH if they are married, or above the pay-grade of E-5.
You can use this housing allowance to buy a duplex, triplex, or four-plex to house-hack! House-hacking is when you buy a property, and then rent out the other units, or rooms to tenants/roommates. By doing this your tenants will pay your mortgage, and potentially even put money in your pocket each month!
I bought a duplex in 2015, and the numbers broke out like this:
Total expenses: $700/month
That means I had to pay $185/month in expenses… and got to keep $665/month of my BAH!
When I moved out of the duplex and rented the other side, I was suddenly earning around $300/month in cash flow!
BAH, when used properly, is a great tool to use for the military real estate investor!
Another strategy is to live for as little money as possible. You could rent a cheap apartment, studio, room, or even RV, in order to save the extra BAH for investment capital!
5. Safety net
Investing is risky. Don’t let anybody tell you that it isn’t. A wonderful benefit to life in the military is the safety net it creates. No matter how bad an investment goes, you can always fall back into base housing, and eating at the chow-hall, or buying groceries on base for cheap.
The military isn’t going to let you starve, or live on the street. Unless you do something really irresponsible, or illegal, you don’t need to worry about getting fired either.
This job security allows you to take slightly larger risks, because you and your family will be taken care of no matter what!
A lot of investors get stuck in “analysis paralysis.” There is no such thing as a perfect investment, so stop looking for one! Set your criteria, look for a good property, and then decide!
The military style of leadership rewards decisiveness. Even a bad decision is treated better than not making a decision at all. This training pays off in real estate investing because we are able to quickly decide yay or nay on a property.
Likewise the lack of decisiveness will be the death of all your endeavors, because you will never start.
The military way of life is not easy, but it creates a lot of unique opportunities to become a successful investor. Take advantage of these opportunities, and build wealth as a military real estate investor!