Because military personnel have to move frequently (often every three years), it can seem intimidating—and financially impractical—to buy a home. As a result, although 64% of Americans own their home, only 38% of active-duty service members can make that same claim, according to Military.com (the remaining 40% rent off base and 22% live in military housing).
Yet as Adam’s story proves, owning and even investing in real estate can be done—even while on active duty—and be an appealing option for a growing number who want to take steps to secure their financial future.
“Many active-duty families choose to buy a home at a duty station, with plans to either sell it when they leave or rent it out,” says Amy Bushatz, Military Spouse and Family editor for Military.com.
Plus, since many troops return several times to the same duty station, owning real estate gives them a home to come back to later.
“Some families also find themselves stationed in an area they grow to love and hope to call home after retirement,” Bushatz adds. “By purchasing a home there and then renting it out if they need to temporarily move away, they create something to look forward to once they leave active duty.”
A military homeowner’s secret weapon: The VA loan
In an effort to encourage military personnel to purchase homes, the U.S. government has a number of financing options to help out—starting, first and foremost, with the VA home loan.
The Veterans Affairs home loan program offers loans to both active and retired military at competitive interest rates, with no down payment or private mortgage insurance. That’s a bargain compared with the usual 20% down payment and other expenses faced by nonmilitary homeowners.
Furthermore, active military also receive a Basic Allowance for Housing, a nontaxable monthly stipend that can be put toward renting a home or paying a mortgage.
To determine the BAH amount, the service member’s rank and dependency status are first taken into consideration. Then, because the price of homes varies greatly throughout the country, the BAH varies from state to state as well, generally providing more funds to personnel stationed in more expensive areas. For example, a private (the lowest rank of the military) based in San Francisco would receive $4,200 per month with dependents, or $3,150 without. A soldier with the same rank in Johnstown, PA, would receive $774 with dependents, or $591 without.
Put the VA loan and BAH together, and buying a home can often be realistically within reach.
How property managers can pitch in during deployments
So what if a deployment forces you to pick up and move to a new state, or continent? It’s entirely possible to hold onto the house and turn it into a rental with the help of a property manager—someone hired to stay on top of maintenance, rent collection, and other landlord-related issues for a portion of the rent amounting to anywhere from 4% to 12%.
Army Capt. Logan Lee learned the importance of a property manager after he bought a duplex in Fort Hood.
“I lived in one side and rented out the other,” says Lee. Only shortly after moving in, “I received orders to deploy to Afghanistan, so I rented out bothsides.”
At first, Lee tried to manage his duplex from afar.
“Only with the military lifestyle and work demands, it is very hard to do a good job,” he admits. So he hired a property manager, and is very glad he did.
“For me, having a property management company was huge,” he says. “That way, I could focus on my job, and touch base every now and then with the management company.”
How to get started
While investing in real estate may seem intimidating, resources abound for novice investors. Adams found support and guidance at real estate investment site Bigger Pockets. Lee also says that being in the military gives you a leg up in terms of being seen as someone that contractors, management companies, and other real estate professionals can trust.
“They’ll take you more seriously and trust your word without having a prior relationship,” says Lee. “I was young getting started, and I think being in the military helped when I met with real estate professionals who had been in the business for decades.”
For military personnel trying to decide whether owning a home is in their best interest, the following questions may be helpful to consider:
- Can you cover a mortgage with your BAH?
- Are you willing to hire a property manager and rent out the home when you no longer live there?
- If you decide to eventually convert your owner-occupied home into a single-family rental, would the rent cover your mortgage and fees so you can move on to using your BAH to rent or buy a home in your new locale?
Once you’re ready to take the plunge, make sure you’re in the right hands with a veteran-friendly real estate agent, and consider all of the costsassociated with this important investment. For more advice read this Veteran’s Guide to Home Buying.