4 Reasons Why You Should Invest in Real Estate While Serving in the Military

No matter if you are in the Navy, Marine Corps, Army, Air Force, or Coast Guard, whether you have a family, or living alone, full time, or perhaps a “weekend warrior,” located within the States, or serving abroad, every investment strategy should be calculated around the place where your abilities, your finances, and your goals meet. That being said, I’ve found that there are some true advantages to those that serve in the military when it comes to investing in real estate.

It seems as though the largest hurdle for those looking to invest in real estate while serving in the US Military is that your location is not guaranteed to remain the same. While it is helpful to reside in the same area you invest, it is not required. We’ll dive into why this is true and the four advantages to investing in real estate while serving in the military.

1. House Hacking

Many service members become real estate investors almost by accident, by merely turning their existing home into a rental each time they move. We find that often times we are uprooted and forced to move every 2-3 years, but if smart about a home purchase, the “house-hacking” strategy can be incredibly powerful. The term “house-hacking” is somewhat new, but the theory behind the term has been around for ages. The ultimate goal is to have other people paying your mortgage while living in your home. As discussed above, one idea is to purchase a home that will perform as a strong rental home after you move. This won’t work in every market, but many markets will allow for the rental income to realize a positive cash flow, after all expenses are paid. An idea behind owning a single family home is to have someone you know in the military become a roommate and pay rent to live in one of the rooms. Not only does this help pay the mortgage, but it gives a familiar military service member a great place to live. Now, depending on your marital status and child situation, this might not work, but is always an option. Hey…think of it as free babysitting! The idea of purchasing a small multifamily property might be a better way to go. A duplex, triplex, or fourplex is still considered in the same category as a single family home, when it comes to financing (which we’ll get into why this matters below). A plausible way to have your mortgage paid for by your tenants is to live in one unit, while renting out the other units. There is potential for your mortgage to completely be paid for by your renters.

2. Network & Partners

In my mind, there is no stronger bond than with those you have served in the military with. And even with those you haven’t directly served with, there is still a tight connection that can’t be placed anywhere else. Think about how many people you know, how many connections you’ve made throughout your service, and how spread out they are around the world. This is your network! I would argue it’s one of the best networks you could possibly be a part of. I would also argue that there are many within your network that would jump at a second’s notice to help you out if in need; regardless of how well they truly know you. Jim Rohn said that you become the average of the 5 people you spend most of your time with. The like-minded military members that you serve with have a powerful connection to your success. Most in the military are type A personalities; strong willed, motivated, action oriented, don’t take no for an answer type individuals. These people are your friends, your co-workers, your mentors, and potential business partners. Maybe one of your past roommates on the ship is now buying and selling homes in Dallas, TX. Or maybe your buddy that you served in Iraq with decided to get out of the military and has become a mortgage broker in Florida. Or maybe even someone you don’t even know started their own house-flipping business in Ohio after they got out after 20 years of service and you are looking for tips on how to get started yourself. The possibilities are endless, and the opportunities that can come out of your military network are HUGE!

3. Military Benefits

Hinted at above, the VA loan has incredible benefits to helping you get started as a real estate investor. Often times the biggest challenge for service members is access to capital, but having the capability to purchase real estate with no-money down through a government backed loan is one of best benefits a service member has over non-military type investors. The rules change over time, so be sure to know what the latest rules are, but in general, as a military member you have access to buying single family homes, duplexes, triplexes, and fourplexes with zero-money down. Talk about maximizing your leverage! This is a major opportunity to buy long-term investments without using any of your capital. Besides the VA loan, the Servicemembers Civil Relief Act (SCRA) provides active-duty military personnel and their families’ financial protection involving interest rates, income tax payments, eviction, foreclosure, and more. For example, military personnel can ask creditors—including their mortgage lender—to cap their interest rate at 6% during their term of service. Granted, most home loans are down at 4% right now, but how about your credit card you may be using to buy all of the fixer-upper remedies at your house? And speaking of fixer-upper remedies, another great benefit to military members are all of the discounts that are offered. For example, Home Depot and Lowes offer a 10% discount just by showing your military ID card. And there are a ton of others; check out http://militarybenefits.info/military-discounts/ for more info. Use this to your advantage…and your wallet.

4. Opportunities to Save

While the classic personal finance advice is to modestly “save more” – it’s not enough to simply save money unless that saved money has a higher purpose. After all, you won’t build wealth until your money is working to earn you money. Besides using the VA loan, you will be required to at some point have some cash on hand when investing in real estate. Whether it’s down payments for more houses, repairs or upgrades to existing homes, buying mortgage notes, private money lending, or just having an emergency fund in case something goes wrong, having additional capital is always needed. Granted, your government job isn’t going to make you a millionaire, but it does give you plenty of opportunities to save money for future real estate deals. First, the dreaded “D” word (deployment) is often feared, but if taken advantage of in terms of your finances, it has huge benefits. Besides reducing your expenses to almost nothing when you are deployed, often you are deploying to tax free zones and hazardous duty pay zones. Take advantage of these deployments to build up capital, pay off debt, and get to a better financial state, so when you return you can buy more real estate. Second, overseas tours may offer opportunities to make more money in terms of monthly income. Often times you receive additional stipends like COLA (cost of living allowance) that can help you add to the savings account. If budgeted correctly, living overseas can help you build a pile of cash for when you return to the states. Lastly, take advantage of your tax-free allowances (BAH, BAS, enlistment bonuses, etc.) and annual pay increases. Look for ways that you can save these funds for real estate investing. If you live in an area where your basic housing allowance is $2,000 a month, find a place to live that costs $1,500 a month and put that extra $500 towards future real estate purchases. Same goes for bonuses, and other similar allowances. Additionally, when your pay increases every year, by either a government pay increase, rank upgrade, or time-in-service upgrade, use that pay increase to go towards your savings. If you gain the rank from O-3 to O-4, but still live like you are an O-3, take that extra pay and put it in your savings account. It will build up fairly quickly and will be another avenue for growing the capital needed to invest in real estate.

Written by:
Stuart Grazier
President of MOREIC.com