Real estate can be a fantastic investment option. It generates passive income, it’s long-term, and it often carries lower risk than other options such as investing in the stock market. As a military member, you might buy a home to live in and keep it as an investment rental property when you move to another duty station or as a home you'll never live in but only rent out.
But is it for you? Examine what you need to know before investing in a rental property.
Buying a Home to Rent Out Later
1. What is the state of your finances?
There’s no sense in jeopardizing your finances by adding debt to more debt. If you’re thinking about buying a home solely as an investment property with no intention of living there yourself, then it’s probably best to wait until after you’ve paid off other debt.
Getting your finances in order before jumping into a real estate investment can reduce your financial risk, as you can invest with the peace of mind that should something unexpected happen or the property sit vacant, you can afford to pay the mortgage.
2. Are you ready to be a landlord?
A critical factor in determining if real estate is the right investment for you is understanding what it means to be a landlord and if you’d make a good one.
As a homeowner renting out your property, you’re assuming a certain amount of risk. You hope that the tenant you spent so much time screening cares for your investment and treats it as if it were their own.
Being a good landlord means that you choose to trust your tenant screening process and use healthy communication with your tenant to ensure that everything runs smoothly. It also means that you or your property manager are reachable, that you listen to your tenant’s concerns, and that you make repairs in a timely manner.
What to Do Before You Buy an Investment Property
1. Save for a down payment.
While the amount you need for a down payment varies based on the loan type, it also depends on your intentions for the property. For example, if you plan to live in the home for a few years before converting it into a rental, you can expect a typical 3-5% down payment.
Can you use a VA loan for an investment property?
One question that might arise is whether you can use a VA loan for an investment property. The answer to that is both yes and no.
When you can use the VA loan for investment property:
- If you plan to live in the home prior to listing it on the rental market.
- If you are buying a multi-unit property like a duplex.
When you can't use the VA loan for investment property:
- If you are buying the home with no intention of living there yourself.
Those purchasing solely as an investment property are looking closer to 15-25% down for conventional investment property loans. Of course, these numbers depend on various factors, including credit score and current interest rates.
Lenders view investment properties as a risk. They believe borrowers may be more likely to miss payments because they don't actually live in the property. Higher down payment requirements help protect lenders and reduce their investment risk. The market also influences these terms.
Current Rates and Example
According to Bankrate, as of August 18, 2025, the national average 30-year fixed mortgage APR for investment properties is 6.67%, with an interest rate of 6.60%. As interest rates have climbed, so have the requirements for second homes and rentals.
For example, a military homebuyer with a 750 credit score (good/excellent, depending on the scoring model used) buying a $320,000 rental property may face:
- Down payment: 20%
- Interest rate: 7.75%
- Monthly payment: $2,293
- Total interest over 30 years: $505,307
With numbers this high, making extra monthly payments ($500–$1,000) can significantly reduce the loan term and save six figures in interest.
Photo by SDI Productions from Getty Images Signature via Canva.com
2. Choose a location for your rental property.
Consider Cost of Living and Property Prices
Choosing a rental property location might be as easy as buying a home at your current duty station. Others may not want to invest in real estate if they're living in an expensive area, because the financial risk is greater.
For instance, if you live in Hawaii, where property prices and the cost of living are famously high, and buy a home while stationed there, receiving orders to North Carolina or a Midwest duty station can create a challenge. If you can’t find a renter for your Hawaii property, you may struggle to cover the mortgage, especially since your BAH at the new duty station is likely lower than your Hawaii BAH. How will you manage both your Hawaii mortgage and your primary residence?
Understand Rental Demand
Even in high-demand areas like Oahu, where tourists and military personnel are abundant, there’s no guarantee your property will never sit vacant. The housing market can be unpredictable, and an investment this size shouldn’t be made without accounting for all potential risk factors.
To avoid greater risk, you might consider buying a rental property elsewhere. Don’t forgo a rental investment altogether if you’ve decided that’s the next step for you. Instead, consider buying at a former duty station that you know well or in your home state, where you may have friends or family available to help keep an eye on the property.
3. Learn the law.
Whether you’ve rented a property before as a tenant or landlord, it’s important to refresh your knowledge of the laws protecting tenants before managing an investment property. Make sure you’re familiar with the Fair Housing Act, the Servicemembers Civil Relief Act (SCRA), and the military clause in leases to ensure compliance in your role as a landlord.
Fair Housing Act
The U.S. Department of Housing and Urban Development states that the Fair Housing Act protects people from discrimination when they are renting or buying a home, getting a mortgage, seeking housing assistance, or engaging in other housing-related activities. (Source: HUD)
The Fair Housing Act prohibits discrimination based on:
- Race
- Religion
- Sex
- National origin
- Familial status
- Disability
Servicemembers Civil Relief Act (SCRA):
The SCRA allows service members to terminate a rental agreement early under certain conditions:
- The member entered into military service during the lease.
- The member started a lease during military service and received orders to deploy for at least 90 days.
- The member received Permanent Change of Station orders.
AND
- The tenant provides written notice of intention to move.
- The tenant delivers the landlord a copy of official military orders.
- The tenant satisfies rent payments for both the month notice is given and for the following month.
Military Clause in Lease
Military clauses are not the same as the SCRA and are meant to expand rather than replace it.
Some active-duty tenants could request early lease termination if they receive orders to another nearby military installation. If it’s within a certain proximity to their current duty station, they won’t receive PCS orders and therefore wouldn’t qualify for early termination under the SCRA. Tenants might also ask for a military clause inclusion to allow early termination if the service member receives housing on base.
Photo by Susannah Townsend from corelens via Canva.com
What to Look For in a Property You'll Rent Out Later
1. Budget-friendly.
Remember, you’re shopping for a rental property, not your dream home. There’s no need to get carried away with personal wish-list items. Look for a home that has a reasonable monthly mortgage payment and fits easily within your allotted budget.
2. Three bedrooms.
Three or more bedrooms will accommodate most potential tenants, couples with kids, service members rooming together, or newlyweds interested in a home office and guest room. Three is the most versatile number.
3. Move-in ready.
The last thing you want, especially as a long-distance landlord, is a property with a laundry list of expensive repairs. Of course, you may want to invest in minor updates and repairs like paint and new flooring. Prioritize homes with features like a newer HVAC system and roof, even if the kitchen and bathrooms don’t reflect the latest trends.
4. Estimated rent.
Check MilitaryByOwner listings to compare rental prices in your desired location. Also, consider the area’s Basic Allowance for Housing (BAH), since military families may be your primary tenants. Each MBO listing includes a BAH calculator, or you can search for a specific area’s BAH BAH using our BAH calculator.
Factor in Expenses
Your Mortgage
The largest expense you’ll deduct from your rental income is your monthly mortgage payment. Calculate 15-or 30-year loan payments yourself or check with your lender to get a more accurate number.
Property Manager
A property manager handles rent collection, tenant screening, inspections, repairs, and more. Their fees usually range from 8% to 12% of your monthly rental income, so factor this into your budget.
Landlord Insurance
Homeowners’ insurance isn’t enough for a rental property. You'll want to purchase landlord insurance, which covers:
- The house itself and other structures (like sheds)
- The owner’s possessions (not tenants’)
- Lost rental income if the property is uninhabitable
- Liability protection for injuries or lawsuits
Landlord policies are meant to protect you and the property. They don't cover the tenant’s possessions, so you may want to make having renters' insurance a requirement for all tenants.
Funds for Maintenance and Repairs
Just like any home, rental properties need upkeep. Budget ahead for necessary repairs and upkeep, whether you manage the property yourself or hire a property manager.
Buying a rental property can be a great way to grow your wealth. And if now’s the right time for you to make this type of investment, MilitaryByOwner can help!
With home listings, a local business directory, and resource articles packed full of information on home buying, renting, becoming a landlord, and more, we’ll help you as you make this next step toward expanding your investments.
We've put together a free resource to help you navigate being a landlord! Click below to find out more.
