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Everyone has a vision of what retirement post-military life looks like. Some might see a chef’s kitchen filled with family and friends for holiday dinners. Others have dreams of first-class seats around the world to finally satisfy their wanderlust. For others, a retirement future holds the freedom to visit grown kids at the drop of a hat.
But to achieve any of these dreams, they'll need the money to fund the fun. So how do they get there? How can they ensure they're ready? Time marches faster than most think, especially as more and more birthdays appear in the rearview mirror.
Preparing for Life After the Military
Take a look at some of these retirement savings stats to put things in perspective.
The Economic Policy Institute (EPI) reports that the mean retirement savings for working-age families (ages 32 to 61)is around $95,776. Even more striking is the median savings, which sits much lower at just $5,000. This number reveals just how many families have little to nothing saved for retirement. It's a stark reminder that many Americans are falling short when it comes to financial readiness for the future.
Here’s a helpful timeline from Fidelity Investments, offering a general benchmark for retirement readiness:
- By age 30: Save the equivalent of the annual salary
- By age 40: Save three times the salary
- By age 50: Save six times the salary
- By age 60: Save eight times the salary
- By age 67: Save ten times the salary
These milestones aren’t one-size-fits-all, but they provide a solid starting point to help working Americans stay on track for their ideal retirement. While saving for retirement comes in many forms, such as 401Ks, private investment accounts, and the Thrift Savings Plan (it’s a good idea to max out investments), there’s more that military members can do to work toward those sweet years on the horizon—real estate investing.
Investing in Real Estate as a Military Member
Due to frequent duty station changes, military members are uniquely positioned to incorporate real estate income into their retirement portfolios.
Real estate offers a practical investment opportunity by fulfilling a fundamental need: a place to live. Since housing expenses are inevitable at each new assignment, converting a primary residence into a future rental can provide dual benefits by meeting immediate housing needs and generating long-term passive income to support retirement goals.
To maximize this opportunity, it’s essential to view the property being purchased not as a temporary home but as part of a long-term investment strategy. This approach requires setting aside personal preferences and emotional attachments. If the intent is to rent the property following a permanent change of station (PCS), it's best to approach the purchase through the lens of an investor.
An ideal rental property may not include luxury features such as an in-ground pool or high-end finishes. Instead, military members should focus on a neutral, move-in-ready home with three or more bedrooms and create an inviting space where future tenants can easily envision themselves living. Selecting a property that appeals to a broad tenant base increases the potential for steady rental income and long-term financial growth.
While searching for a promising investment property, it’s important to identify the target rental market. In areas near military installations, military families will likely be the primary tenant demographic. In these cases, proximity to the base becomes a key consideration, along with awareness of local Basic Allowance for Housing (BAH) rates.
The next step should be a thorough financial review. Although it may be possible to find a home within BAH limits that appeals to a broad pool of renters, the objective is to generate positive monthly income. Begin budget planning early, taking into account factors such as mortgage rates, homeowners and landlord insurance, emergency reserves, property management or self-management alternatives, and cleaning or tenant turnover expenses.
From there, it's easier to determine the minimum rental rate needed not only to cover costs but also to yield a profit. Ideally, this amount should align with or remain under current BAH limits to attract qualified tenants.
Find out current BAH rates here with MilitaryByOwner’s BAH calculator.
Beyond rental viability, it's crucial to consider long-term investment goals. Paying off the mortgage opens up several possibilities.
- Sell the property and redirect the proceeds into a retirement savings vehicle, such as an annuity.
- Retain ownership and continue collecting monthly rental income as a cash flow supplement.
- Reinvest the equity by purchasing an additional income-producing property.
It's wise to talk to a tax advisor before using any of these strategies. Professional guidance will help clarify potential obligations, such as capital gains taxes, and assist in selecting the most beneficial course of action.
Photo by Vasyl Dolmatov from Getty Images Pro via Canva.com
The VA Home Loan
Service members have access to a valuable home financing benefit in the form of the VA loan. This option allows for the purchase of a home with no down payment, making it especially appealing during a permanent change of station (PCS). Compared to moving into a rental property, which often involves a security deposit, the first and last month’s rent, and additional fees such as a pet deposit, a VA loan can significantly reduce initial out-of-pocket expenses. In many cases, the first mortgage payment is not due until the month following the closing date.
However, the relatively low upfront costs associated with a VA home loan shouldn’t be confused with low overall costs. Homeownership brings ongoing financial responsibilities that renters typically avoid. These may include replacing appliances, annual HVAC maintenance, and routine inspections. Careful budgeting is essential to account for these long-term expenses.
It’s also important to note that VA does not offer investment property loans. To qualify, the buyer must intend to use the home as a primary residence. However, this requirement does not conflict with the strategy of living in the home during active-duty orders and later converting it into a rental property after a PCS.
Learn more about the different types of home loans in the short video below and then read on.
Additional Home Financing Options
A VA loan can be an incredible benefit, but it’s not always the right fit for every home purchase. There are a few situations where it might make more sense to explore other financing options for investment property loans:
- Already using your VA loan? Unless eligible for a second one, which does happen in some cases, a service member may need to go with a different type of loan this time.
- The home doesn’t pass VA standards. VA loans have strict requirements to ensure the property is safe and move-in ready. The property may not qualify if it needs a lot of work.
- Not a fan of the VA funding fee? This one-time fee can be lumped into the loan, but it increases the total amount. For some buyers, starting out “underwater” (owing more than the home is worth) doesn’t sit right.
- Looking at a condo? The VA loan can't be used if the development isn’t on the VA’s approved list. Getting the VA to approve the complex can take time or may not happen at all.
- Buying in a hot market? In super competitive areas, some sellers prefer conventional loan buyers because they believe it’ll mean fewer hoops to jump through. It’s not always fair, but it’s something to keep in mind.
Bottom line? The VA loan is a fantastic tool, but it’s okay to explore other options if it doesn’t fit the situation. A good lender can walk through the pros and cons of each route to help find what works best.
Down Payment Assistance
Even for those who prefer the VA loan, sometimes the timing or circumstances simply don’t line up. That doesn’t mean investing in real estate has to be off the table. There are other financing options worth exploring, including conventional, FHA, and USDA loans, as well as plenty of programs that can help ease the upfront costs of buying a home.
What is a down payment assistance program?
Down payment assistance (DPA) programs come in the form of grants, deferred-payment loans, or forgivable loans. The goal is to make homeownership more accessible, especially for first-time or moderate-income buyers, including many military families.
Across the country, state and local housing agencies offer assistance, and many of the eligibility guidelines follow this general pattern:
- First-time homebuyer status, typically defined as not having owned in the last three years.
- A low to moderate income, often up to 120% of the area median income (AMI).
- The home must be used as a primary residence.
- The property may need to be located in a designated area.
- The program must accompany an approved mortgage.
However, these aren’t hard-and-fast rules. Some programs go further, allowing up to 120% of AMI or city-specific programs that increase limits to 150%. These are found in San Diego and beyond. These expanded criteria make many military households a strong match, especially those earning steady, moderate incomes.
Where to find a down payment assistance programs?
Wells Fargo (via CityLIFT, NeighborhoodLIFT, and HomeLIFT) or government-backed sources like Fannie Mae are a few lenders who may offer down payment assistance options. But most are managed at the state and local levels. Programs vary by region, so eligibility and benefits depend on location.
A great starting point is the state’s housing agency. Real estate professionals familiar with military moves and benefits can also point families in the right direction to help them navigate the application process.
The financial advantages of homeownership, especially as a long-term investment, are hard to ignore when planning for retirement. For military families ready to explore real estate as part of that plan, MilitaryByOwner offers tools and guidance to support each step of the journey.
By Danielle Keech
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