Four Real Estate Hacks if You’re in the Military

The military is a great opportunity to start investing in real estate.

Few people join the military for its investment potential. Most of the time, people join out of patriotism, and pride, and (let’s be honest) for long-term benefits. Between retirement, health care, the GI Bill, and the VA Home Loan, military service is full of upside for savvy savers. Investing in real estate, for people who enjoy that and want to use it to generate revenue, can further diversify one’s financial portfolio.

Over the long term, real estate is one of the more secure investments out there, with the average annual increase in value of a property since 1991 coming in at 4.3%. That’s not the same as owning stock or an ETF, but real estate — especially houses and apartments — come with an additional benefit: they are capable of generating their own value (rental, AirBnb), can be resold, and can even be lived in if necessary.

As Jesse Owens said: “I had four gold medals, but you can’t eat gold medals.” Well, you can’t eat real estate (unless it’s a farm!) but you can sleep there.

Here are four great ways to supercharge real estate investment for folks joining the military.

#1: Start Early

If your first post in the military happens to be in a good area with affordable opportunities (never buy something bigger than you can afford) you can put your money to work when you arrive. While some people are looking for places to rent, see if you can crash with a comrade or sublet while you look at potential homes.

For officers and senior enlisted, buying a house can be a great way to make the most of BAH (basic housing allowance), a stipend you get to procure off-post housing. BAH counts as income for loan application purposes, which can make a big difference when looking at mortgages. Taking on a 30 year fixed-rate mortgage as a 22-year-old second lieutenant just out of West Point could set that same person up to have have most of a house paid off as a 38 year old lieutenant colonel retiring from the military.

House-buying is an extremely lengthy and intensive process, and the sooner you start, the more of an advantage you have.

#2: Look for Contrasts

For the troops who are drawn to real estate as a career, the military offers unusual opportunities. Whether one’s living off-post as an officer or senior enlisted, or in the barracks as junior enlisted, one of the great advantages of military service for most people is living in different places — almost certainly moving states, and possibly moving to entirely different countries.

That means stumbling upon economic contrasts — places where the cost of living is much higher or lower.

Posted to a place like Vicenza, Italy, where the cost of living is high? Bank as much of your BAH as you can living with other lieutenants. Find yourself in a place where the cost of living and price of homes is low, such as Fort Moore, Fort Irwin, or Fort Liberty? Consider using what you saved to buy something.

“Why should I do that,” you ask, “I’d rather have a house in Vicenza, Italy than in Columbus, Georgia.” Because investing is risky, and one easy way to be caught short is buying something relatively expensive and then moving to a post with a substantially lower cost of living, then not being able to afford mortgage payments. If you aren’t married and you don’t have specific living needs with a house, use that flexibility to your advantage to find the best possible fit for your needs.

#3 Share the Financial Burden if You Can

Especially for junior officers and soldiers, this can be a viable way of increasing your purchasing power: throw in together on a house with 2-3 people. This could require incorporating as an LLC, which is not expensive.

Unless you plan to make this house your primary residence, its purpose as an investment is either to rent, or to improve and sell. Either way, it is something that will make you money. If you know and trust another likeminded friend or two — but not more — then all of you can share in the proceeds, and also the risks.

If the partnership works out, you might have found a viable business after the military. And if it doesn’t, you’ve learned valuable lessons about how to structure a business, and acquire or develop real estate.

#4 Research Property Management Options

Buying property while in the military means assuming there’s a chance that you won’t be there to manage it directly yourself. Some people enter the military expecting to serve careers and leave after a single disappointing rotation. Others think about the military in terms of the benefits of service, planning to leave after their initial obligation, only to learn that they love the service, and stay for 20 years (or longer). Plans change.

You have to control risk with a real estate purchase. Part of risk mitigation is thinking about what might happen if something unexpected happens. Property managers can be expensive, and not all of them are good — the process requires research.

But if and when you move, you’ll be glad you did that work up front; every area has its challenges with weather, pests, and animals. Whether you have renters (ideally) or not, having a person on site and in person to look after one’s property and take reasonable steps to fix small problems or flag larger problems will pay for itself over time.

There are many other considerations to weigh before buying a house as an investment while in the military; these are four of the most crucial. Done properly, it’s possible to leave the military with one or more properties under one’s belt — stable sources of revenue for you and your family.

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