Retired Air Force Family

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How to Invest in Real Estate While on Active Duty

OK, so you’ve decided you’d like to Invest in real estate using your VA loan eligibility to purchase a home while on Active Duty with the intent of keeping the home as a rental when you PCS. Congratulations! This is a smart way to use your BAH and VA Loan benefits to start building wealth for your family and begin supplementing your military retirement.

We highly recommend purchasing and investing in a home you will live in first. There are many advantages to being an owner-occupant before renting out the home. The first and most important, is the financing. As a military member, you have the option of using VA financing ($0 down) to purchase. The second benefit is you can learn the property and fix any issues so they won’t be issues when it’s a rental. You can then move out after you PCS into your next personal residence where you’ll do it all over again. Purchasing homes with the purpose of eventually renting them out is different than a regular purchase. So, we’ve compiled 5 tips for purchasing a home while on Active Duty to help you start your real estate investment strategy:

Only invest in areas you are willing to live.

When you’re purchasing a home you know you’ll eventually move out of, you probably won’t purchase your dream home (unless your goal is to retire and move back into that home—more on that in a different post.) Focus on the area and type of home most others will want as well. You will want to purchase at least a 3 bedroom with 1.5 baths, a garage and a home located with easy access to the base, shopping, and good schools. Bottom line– You want renters who are like you!

Purchase properties that are already in good shape.

See a home in a great location that needs a little paint and some new carpeting? No problem. But thinking about purchasing a home where you think you can easily knock out a few walls, gut the kitchen, add a new bathroom, etc…? Probably not a good idea. The goal is to purchase a property with as little money as possible, then move on and let someone else pay the mortgage. You don’t want to spend thousands rehabbing a property that make take years to recoup. The popularity of HGTV and amazing transformations by shows such as the Property Brothers and Rehab Addict aren’t reality for most of us. Stick to properties that need little to no work so you can use your money to pay down the mortgage.

If possible, do a 15-year mortgage.

You’ll have the benefit of a lower interest rate and of course, the quicker you can pay down the mortgage, the less interest you will pay over the life of the loan.

Be conservative when investing.

Want to keep your housing costs within your current BAH amount? Then purchase a home under your limit. For example, if your current BAH is $1200/month, purchase a home with a monthly payment of no more than $1000. Once you PCS, if you decide to hire a property management company to handle your rental (highly recommended), you’ll normally pay about 10% to the management company, plus, you want to keep a separate savings account for each rental. Again, you’re not purchasing your dream home. You’re purchasing as an investment strategy to make money. Be conservative.

Don’t worry about the resale market.

Real Estate will fluctuate. Markets will go up and go down–they always do. But you’re in this for the long haul. At each PCS, it’s a smart idea to sit down with your Realtor and evaluate the current rental and resale markets, but don’t worry year to year what the market is doing. Your goal is to keep the property so when you’re ready to retire, you’ll have a steady stream of income.

Want to get started using your VA benefits to purchase a home? We have a vast military-affiliated network at every stateside base, so whether you’re stationed at Hill AFB, or any other location, we can help! Call us today at 801-821-9400 or 801-821-9401.