The Two Pillars of Real Estate Investing While Serving in the Military
Thinking about life after the military can often lead you to start thinking about what your finances will look like. Have you ever thought to yourself, "I wish I had another stream of income"? We are preparing to hold our annual event as an organization to make this transition an easier reality.
Military members and even their family members contact me via our ADPI website all the time and say things like, “Well, you are lucky because you knew what you wanted to do after the military.” Not true. But I’ll tell you what I figured out with mentors, education, and research about real estate and my VA loan benefits: I knew that I never wanted to be scrambling to find a “job” when I started the transition process. I have since truly sought to help others understand the benefits, opportunities, and potential they have and can use their benefits for.
Transitioning from a military career to civilian career was not easy. Even with all the help we get, the process is often stressful and a true realization that you are moving from one way of living to the next… civilian life. When you are in the military, you have a lot of checkboxes that are mandatory. When you start to make that transition, you can start to feel a little disoriented. So here is what I decided to do. I've also continued the journey by bringing many of my friends and family alongside.
Create as many streams of passive income as I could before I transitioned from military life to civilian life. How? Buy and Hold real estate investing with a focus on cash flow.
Cash flow is essentially anything that is left over from your investment property’s monthly gross rent after all expenses are paid.
I like comparing it to the “High-3” retirement system. In 2018, the High-3 became a thing of the past (except for those who opted to stay with the old system and were grandfathered in), and the Blended Retirement System (BRS) is the new standard.
Without getting into too much detail, the goal of the High-3 system was to reach at least 20 years in the military and then receive 50% of your base pay (averaged over the previous three years). This military retirement plan has achieved almost mythical status amongst our ranks because it is completely passive income. Everyone realizes that having half of your paycheck continuously dripping into your bank is such a wonderful safety net.
Well, what if you were able to generate a similar paycheck for yourself and not have to wait 20 years? And what if that paycheck had a quality of increasing every year and also growing your net worth simultaneously? And finally, what if you found yourself paying less taxes overall because of this passive income? Sounds awesome, right? That’s real estate cash flow.
As I started my journey to explore this more, not only did I use the education around me to create the cashflow I desired by purchasing property, but I also dove right in and looked at what benefits I could continue to count on from my service. These benefits include Reserve Healthcare benefits and VA disability. I looked over everything because transitioning is hard and I knew it as I was doing it. I am thankful now more than ever that I objectively viewed my position but continued to grow into what I am today, the CEO of a company that truly has helped thousands of service members obtain generational wealth.
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Buy and HoldIt’s a little shaky out there when it comes to interest rates, but not because they are something we have never seen before, but because they are not familiar in the past couple of years. If you bought real estate before the 2008 crash or know someone who did, you might actually be scared of real estate investing. It is inherently a risky business. This is why education is crucial and understanding the “Buy and Hold” strategy will boost your confidence.
When implemented correctly, The Buy and Hold strategy helps minimize the risk of your investment property becoming a liability. Remember, we want assets; we want to grow what we are worth. Sidebar, when you rent, you are growing someone else’s wealth and asset package!
The idea behind Buy and Hold is simple: Buy a solid investment property that is very rentable (good school district, size, location, job market, etc.) and never sell it… especially during a market crash. If you treat a property’s value as your only metric of its success as an investment, a market crash will cause you to go crazy. The worst thing you can do during a crash is sell your property at a loss. The best thing you can do is continue renting it out, even if the cash flow is virtually nonexistent (or maybe even slightly in the negatives).
This goes for purchasing a home also! Most people are focused on the rates instead of the reality of the fact that you have to have a property to live in. This means renting for some and purchasing for others. When you want to grow your worth, you need to become educated about the area you're moving to as a military member. The wonderful thing about buying a home around a military post or base is that there is a population that is always revolving and paid. Don’t let this be lost to you. If you're able to obtain a property that you know you will live in and pay on, and it also has potential to be rented out later because of a base being close by, run the numbers and see if purchasing now could help you grow your future wealth.
Stay the course; the best is yet to come. Real estate follows an up and down curve with a historical upward trend. During a crash, you should save up as much cash as you can and hold on to your assets. As the market slowly starts to recover, buy more assets (read: investment properties) while everyone else is still recovering.
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In summary, you can create passive income streams while in the military if you buy and hold investment properties that produce cash flow.
The most cost effective way to do this is by purchasing a good property at every duty station with a VA loan. Rinse and repeat. You can do this as many times as you like. All you need to do is either wait a year or get orders to move somewhere else. There are also many ways to accelerate this strategy and really get a jump start towards financial freedom.
One of the best ways to accelerate yourself towards your passive income goals, however, is investing in turn-key real estate. Not every duty station will have smart investment options, and sometimes we are on deployment or stationed overseas. The good news is, it is very possible to buy cash flow investment properties out of state or while OCONUS. If you trust your turn-key providers and you have access to lenders who are experts in working with military investors, you could set yourself up for a significant amount of passive income.
From the beginning of my journey, there have been many different directions offered to myself and the other amazing veterans that I currently work with and we have truly as a team elevated the education and networking in the last few years. I cannot recommend enough, you must get educated and see what is out there for you when it comes to building wealth through real estate. With the brainpower we have on our team, we have expanded into many areas of education to include long-term rentals, short-term rentals, and multi-family.
Get educated to ensure that, as the market shifts and you are still out there building your wealth, you're prepared for all scenarios. Start the spark in your family and come join us at our annual event ADPICON in Oct 2023 in Military City, San Antonio, to learn even more!