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Most people feel the financial burdens of the modern age. There's always some new project, debt, or plan that stretches the monthly budget. The goal to build wealth is almost universal.
Still, the military can make that goal tricky. Military careers are typically stable, but they’re demanding, and they leave little room for side jobs or additional sources of income. While it’s slowly improving, it’s often tough for military spouses to work steadily.
With PCS moves every couple of years, a dependable second income can feel more like a wish than a reality. Investment properties could be a favorable solution for service members and their families.
Why Invest in Real Estate?
It’s Passive
When time is tight, an investment that runs itself is key. Real estate can add additional income without requiring constant attention. It allows money to grow as the investor focuses on other, more demanding needs.
It’s Tangible
Unlike stocks or other paper investments, real estate is something the investor can see, touch, and improve. That control means there’s room to boost both the value and income it generates through upgrades and smart property management.
It’s Relatively Low-Risk
Every investment carries uncertainty, but real estate tends to be more reliable than the stock market. Over time, property values typically rise. Historically, even after dips, the market bounces back, and it climbs higher.
Is Real Estate the Right Investment for You?
Be wary of stacking debt. It’s rarely worth risking financial stability by piling new debt on top of existing debt. If the plan is to buy a property solely as an investment without living in it, it’s usually better to wait until other obligations are under control. Mortgage lenders often require a higher down payment or interest rates for investment properties.
However, those who buy a primary home can use the VA loan, and then they can turn it into a rental when they receive orders to PCS. There's no right way to buy an investment property. However, timing may dictate the answer. Military borrowers should explore investment property loans or even a VA loan for a rental property when planning ahead.
If retirement savings are on track, there’s a healthy emergency fund, and the kids’ college savings are in motion, then stepping into real estate could be the next smart move.
What Military Members Should Know About Real Estate Investment Properties
A military career can be a powerful asset when investing in real estate. While it often means managing a property from afar, the unique experiences that come with military life bring undeniable advantages.
The Area Is Familiar
Frequent PCS moves provide exposure to real estate markets across multiple locations. That familiarity can make it easier to navigate housing trends and become a confident long-distance landlord.
Investing at a current or former duty station means understanding the community. In many cases, a strong military presence in the area makes properties more appealing to renters, and it also reduces the risk of long vacancies.
Connection with Local Businesses
No one manages a property entirely on their own, even those who are lucky enough to operate a rental right down the road. Well-established relationships with local service providers, maintenance people, HVAC technicians, and plumbers can make home maintenance far less stressful when issues arise.
Access to Excellent Financing Options
Military status opens the door to home financing options that can make real estate investing more attainable, including investment property loans and programs like a VA loan for an investment property. Before deciding, it’s worth exploring different loan types and lenders to find the best fit:
- VA Loan
- USDA Loan
- FHA Loan
- Conventional Home Loan
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Real Estate Investing Hinges on Effective Budgeting
While real estate has the potential to generate a steady monthly income for years, it also requires significant upfront and ongoing costs, such as:
Down Payment
For a property you plan to live in, the down payment might be as low as 3–5%. However, for rental properties, lenders often require around 20% because they consider these loans riskier than primary residence mortgages. These loans are considered a business transaction rather than a personal purchase.
Interest Rates
Higher perceived risk often means higher interest rates and a larger down payment. Getting a lender’s quote early can help shape an accurate budget.
Property Insurance
Standard homeowners' insurance isn’t comprehensive enough to cover a rental property. Landlord policies expand coverage to address additional liabilities of tenants, and they typically include the following:
- Dwelling coverage protects the physical structure.
- Landlord’s personal property covers items left on-site (but not the tenant’s belongings).
- Liability protects the homeowner in case a tenant or visitor gets injured on the property.
- Loss of rent covers lost rental income if the property becomes uninhabitable due to a covered event.
Maintenance Costs
Maintenance expenses vary from property to property, but it’s wise to set a cushion aside for the monthly costs associated with owning a rental.
Anticipated expenses:
- Repairs to the HVAC, roof, plumbing, and appliances
- Landscaping
- HOA fees
- Pest control
- Cleaning costs
Utilities
Tenants cover most utilities, but owners may still have to pay for water or trash pickup. Tenants typically pay for gas, electricity, and internet/cable expenses.
Emergency Funds
Along with running the rental property, there’s still the homeowner's primary living costs to cover. That’s easy enough when rent is coming in regularly, but a vacancy in the rental can tip the balance in a heartbeat.
For military members, PCS moves can add extra pressure. For example, a service member may be stationed in Hawaii, and they buy a rental there. With Hawaii’s higher BAH, the numbers work. That is, until orders send them to Oklahoma, where the BAH is much lower. If the Hawaii property stays rented, it works. However, if it doesn’t stay occupied, the service member might not be able to afford keeping both locations afloat.
Setting aside a few months of expenses to build an emergency fund can reduce stress in those “what if” moments.
Property Manager
If a property manager is part of the plan, it’s important to budget for their fees. Property management fees are usually 8% to 12% of the monthly rent.
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Finding the Right Investment Property
One of the appealing aspects of investing in real estate is knowing exactly where the money is going. It’s not about sending funds into an unknown “investment pool” and hoping for the best. The investor gets to choose the property. That’s why both research and patience matter when finding an investment property with the best chance of turning a profit. If the property is near a military installation, the target market is already clear.
What should you look for?
Location Matters
Military families often seek a home that offers a short, easy commute to base, and they value convenient access to stores, restaurants, schools, and churches. Other high priorities are a safe neighborhood and a welcoming community. While some may secure homes farther away to gain more space or privacy, many prefer convenience over distance.
Balancing Price and Profit
The goal is profit, so focus on a home that fits the budget while appealing to the average military family moving to the area.
Aim for broad appeal. While high-end features like in-ground pools or gourmet kitchens are nice, most renters are looking for practicality. They’ll often choose a home that meets their needs now, and they’ll save the dream features for a future forever home. A single-family house with three bedrooms and two bathrooms is one of the most versatile and widely appealing setups.
Setting the Rental Price Is Key
The rental price directly impacts monthly take-home income. A key consideration is how much money is needed to cover expenses. Calculating the property’s value in the current housing market will help determine whether the rent can cover expenses each month, but personal finances and market value aren’t the only factors to consider when setting a rent price.
If the plan is to market to fellow military families, look at the area’s BAH and the average housing allowance for incoming families. Pricing the property within that range makes it more attainable for potential tenants and helps keep vacancies low.
Use MilitaryByOwner’s BAH calculator to quickly look up the military BAH for your area.
Should You Hire a Property Manager?
The farther a rental property is from a service member's new duty station, the harder it can be to manage. It may be worth considering hiring a property manager in these cases.
Hiring a property manager can make life as a landlord much easier, but it also reduces the monthly take-home income. The key is deciding whether the peace of mind is worth the cost.
Factors to consider when deciding to hire a property manager:
- What services will the property manager provide?
- What responsibilities still fall under the homeowner?
- How does the property manager run their business?
Taking time to answer these questions will help determine if hiring a property manager is the right move for the property and budget.
Landlord Skills That Make a Difference
Anyone can be a landlord, but being a good landlord takes more effort. Even with help from the best property manager, the role comes with a big dose of responsibility.
Clear Communication
The most important tool a landlord has at their disposal is communication. Setting clear expectations helps tenants understand what’s expected of them, feel secure in the relationship, and reach out when needed. Everyone has a unique communication style, so discerning what works best for both landlord and tenant early on can help prevent misunderstandings later.
Knowledge of the Law
Understanding the Fair Housing Act is essential for landlords. It requires treating all applicants equally and applying the same terms and conditions to everyone. Landlords can’t require a deposit from one group of renters but waive it for another if they fall into a protected class.
For example, the landlord cannot specify that they will only accept tenants who are service members, or that they will waive the security deposit for them but not other applicants. However, they can specify that they are looking for a quiet professional or a non-smoker since these requests do not discriminate against race, gender, religion, or occupation.
Learn more about the Fair Housing Act.
The Ability to Multitask
Maintaining a rental property entails significant effort, whether you manage it yourself or enlist a property manager. Some tasks you’ll need to manage:
- Prepare and list the home for rent
- Find and screen tenants
- Create and sign the contract
- Conduct inspections
- Coordinate repairs and maintenance
- Organize finances
- Keep detailed records
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Tips for Success as a Landlord
Treat It as a Business
It’s easy to get caught up in the idea of a home and buy for sentimental, personal reasons instead of smart, financial ones. A better approach is to choose a property with investment potential. It should be a property that you as a service member can live in for a few years, and then rent it out for a higher return once you PCS to the next duty station.
Be Patient
Without the pressure of needing immediate housing, take the time to find the right investment property. If it doesn’t feel like a good fit, walk away.
Have an Exit Strategy
Holding onto real estate can grow wealth over time, especially as equity builds. However, keeping a rental forever isn’t always the best move. Consider whether the equity is growing faster than it could elsewhere, and be prepared to sell if it makes better financial sense.
Build Community
Networking matters in real estate. Relationships with local businesses can help keep maintenance costs down and provide peace of mind that the property is cared for (especially when managing it from afar).
Choose a Low-Maintenance Property
It’s tempting to grab a fixer-upper at a bargain price, but for a first rental, that can quickly become an expensive headache. Unless there’s a trusted, affordable contractor or the skills and time to handle big renovations independently, stick with a home that’s already in good shape and only needs minor updates.
Over time, there could be a sweet spot for building wealth by investing in a modest home located in a higher-end neighborhood.. This is because with a few smart upgrades, the property can increase in value.
Remember Your Tax Advantages
Rental income is taxable, but the property is also a business, and that means plenty of potential tax deductions. Common write-offs can include the following: advertising, cleaning and maintenance, commissions, depreciation, HOA or condo fees, insurance, interest, property taxes, management fees, pest control, professional services, equipment rentals, repairs, supplies, trash removal, utilities, and yard maintenance.
If the service member manages their rental from a distance, travel expenses count too. Whether it’s a flight, gas, or hotel stay, the costs of checking on the rental property can be considered part of doing business.
Real estate can be a smart path to passive income and growing your wealth. Owning a rental home is a big investment, with plenty of details to sort through. The goal here is to give future landlords the tools and confidence to dive into real estate investing.
By Danielle Keech
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