Why I Stick With Military Rentals.

22 Replies

Many of you may not know that the United States Military is only made up of 1% of America's population, with thousands of service members spread across the country and the world. For those who join it's a path to a career, an education, and maybe retirement, while many things are paid for by the government such as health insurance, not all bases have the ability to house their members on base. This lack of on-base housing forces members to have to buy or rent within the nearby area of the base. This is the perfect opportunity for any Real Estate Investor, no matter what your style of investing is. Military bases themselves are not built in the nice parts of town, they are built where land and property values are cheap, leaving the housing around the base to be an investors dreamland. Now not all bases are like this, there are few exceptions like Vandenburg AFB  and Travis AFB in California. The market trends around military institutions usually do not tend to follow national market trends, even if they are a few hours from major cities, this makes buying properties in bulk a lot easier and keeps your cost of rehabbing them low. I tend to identify properties that are within 10 miles of the base, as they offer the best chance of producing military renters and buyers. How do you get them to bite? You list your property on the base that is closest to your property, most military members get a week or two to identify where they buy or rent, they tend to be long-term with the ever so often deployment. Now I know most of you are thinking "Can't the military break their lease whenever they deploy or get orders?" The answer is yes they can, but in most cases, for every one member that leaves another is showing up to take his or place, often a rank below or equal to the service member who just left. With renters, you will want to do some research on deployment cycles and BAH (basic allowance for housing) they get this as an added amount of pay to cover rent/mortgages. With our homes we make the members write down the name and number of their supervisor, first sergeant, and commander in the event they damage the homes or don't pay rent. They rent one is fairly uncommon as they get paid on the 1st and 15thof every month no matter what, unlike other job markets the military will still get paid, no matter what the economic impact of the rest of the country. I can go on for days about why anyone should start shifting their money and focus on military communities, I am always available to speak to about opportunities in the areas where I work. If you have any questions feel free to respond I will also be hosting an event in Dallas TX (Real Estate Networks and CIgars). 

Look forward to your comments. 

You are spot on, friend. This is the strategy I am most passionate about. All these points are good ones, plus providing a good solid affordable home is a great way to say thank you to those who defend our freedom.

The large apartment complex where I live has a Military Personal Release clause (per the Servicemembers Civil Relief Act) that allows for early termination of a lease. Since the western end of the Florida Panhandle is home to several military bases, catering to the needs of this tenant base makes good business sense. I know several members of the armed forces are living in the complex because I see them in uniform every day leaving for or returning from work.

@Roger Steciak, they do have a clause, but for everyone that leaves on orders or deployments someone else will arrive at the base and need a place to stay. 

Price appreciation is very low in military markets. Most military markets have high crime. ALL military rentals suffer from higher turnover which kills returns. I sold out of military markets because I was in my early 20s, less experienced, and saw the light in investing in high growth markets (Austin/Dallas). I started investing in 2009, so we’ll see how I fair through the next cycle.

I'll go with Mark here because I know the guy and find him to be very credible. I'm currently looking at a couple deals in Abilene but have mixed feelings due to the high turnover issue. 

Originally posted by @Mark Allen :

Price appreciation is very low in military markets. Most military markets have high crime. ALL military rentals suffer from higher turnover which kills returns. I sold out of military markets because I was in my early 20s, less experienced, and saw the light in investing in high growth markets (Austin/Dallas). I started investing in 2009, so we’ll see how I fair through the next cycle.

Account Closed,

We only actively buy in an area very close to a base, and military housing is a big reason why we picked it!     The advantages of essentially guaranteed income is nice, and majority take wonderful care of the houses.. that being said, that's our only unit that has any turnover, and hence it's the most stressful.     

 Some of our favorite tenants are military, really great A++ renters, for all the reasons you listed above!   ....but.......without a doubt, our worst tenant ever was a military guy, we suspected he was in dog fighting, and brought roaches, and then never told us about the roaches, so when he moved out, it was a crazy roach infestation,  and then he just left all he stuff/trash outside.    It was expensive, stressful, and disgusting!    No one talks about the bad times, just the guaranteed income! 

I say judge on the person, and pick the most qualified and best fit for the house-- not just based on job.    

@Mark Allen It's all about certain bases, high deployment bases are not a very good spot to invest in, and the crime isn't necessarily at all bases. I was at several bases with very low crime rates and the only reason that was the case because the neighborhoods were all military members and screened civilians. 

@Linda D. I have not had any issues with finding or placing tenants, what bases do you tend to occupy? I have a system that we use that holds military individuals and their command accountable for the damage and issues caused by them. If you connect with me, I can go over it with you in more detail.

Account Closed I LOVE this idea. I have several veterans in my family, even my mom and think this is a great way to make their lives a little more pleasant while serving. Do you invest near Carswell or stick to bases with more full time members vs reserves? 

Thanks very much! @Jessica Wygal I tend to stick with bases that are a bit more active than Carwell, not saying it's a bad place to start, but more for multi-family than anything. It should be in the event forums, but email me and I will send you all the info you need. 

Great insight on this post. As a service member what is the average time you expect for a tenant to stay at your property? I would expect the 3-4 years we spend at a station exceeds the normal tenant turnover? Am I wrong? 

@Roger Poole, it all depends on the base, if you go for a training base your turnover is high, but finding new tenants is easy. At an active mission base the turnover is low, but finding a tenant can be a bit tricky.

@Thomas S. That wouldn't be accepted well with the service members, what you can do is charge a higher down payment, but other than that you would have to justify a higher price with nicer updates.

as a veteran myself and an investor in a military town....I rarely rent to military.

joe too volatile for me ;) ;) 

though the market benefits of military towns are fantastic and have radiating benefits. that part I do enjoy!

It's nice to see landlords willing to exert effort in military markets, but at the same time I wouldn't target that demographic for a few reasons:

1) military families are more than used to moving, both during a PCS, or to another location because of price or amenities.  The normal tactics of raising rents annually or per market factors don't neatly apply to military families because they have no problem moving if you suggest bumping the rent $20.  Because assignments seldom last longer than 2-3 years, turnover is substantially higher than the general population.  

2) the Soldier and Sailor Relief Act allows members to break their leases in the event of a deployment or PCS, which basically negates the security an investor gets with one.  Service members have no problem signing a lease because they know they aren't held to it if they get orders moving them somewhere else.  So while you may feel comfortable knowing that you have full vacancy, a deployment can quickly create substantial unplanned vacancy, while reducing the population of available tenants.  When a service member deploys, they often send their spouse and kids to live with a relative for that time so they can still collect the housing allowance and not pay rent.  As a landlord, it doesn't matter if that person is only deploying for 3 months, you have to let them out of the lease.  

3) The influence the supervisor has on the service member paying his or her bills is negligible.  As a commander, I had minimal latitude or authority over private disputes between landlords and their tenants.  I had more than a few bill collectors call my phone and inform me that Sergeant so and so wasn't paying his bills, only to inform them that I had no recourse to make them pay anything, and suggested that they take up the matter in civil or small claims court.  Legally, the only time a commander can take action is if the service member writes a bad check.  Even then, that action doesn't result in the debt being paid.  

4) The areas outside military installations are overrun with a few types of choice establishments that tend to prey on young, gullible service members.  You can usually find used car dealers offering no down payment and 20% interest, check cashing and payday loans, strip clubs, bars, and tattoo parlors a few feet from any gate, none of which exactly correlate to a what most would consider a nice neighborhood to raise a family.  There are, of course, exceptions, but I've seen more that fit that description than don't.  Same goes for the residential offerings immediately outside bases as well, which tend to cater to those with less than reputable financial histories.  

Bottom line, real estate investing is a business.  While catering towards military customers is a noble pursuit, it comes with its own peril.  The military population reflects society as a whole, the good and bad.  If you want to cut a service member a discount, that's great.  But understand that they are just as apt to burn you as anyone else.  Remember that it's your money that you're entrusting to a stranger, and you're not obligated any more or less because they wear the uniform.  Service members are competitively compensated, with regard to skill and experience.  

By no means would I discriminate against a service member.  Aside from being illegal, it breaks the fundamental rule of assessing each applicant by his or her own merits.  I just consider them the same as the rest of the population, with regard to their credit score, income, and references.  All but one of my rentals are in military towns, but I do not currently have any military tenants, for which I am slightly relieved.

I am ex-AF and thought my strategy would be to acquire 2-4 places in every duty stop, but didn’t pull it off. Tried to load up in Colorado Springs near Peterson (but ended up going all over town - so much to sticking to a strategy). Military personnel were tough for me because they both left early. Got another good tenant in and she’s been with me 11 years now and we’ve been semi regular in raising rents and are now back to 4% per year since the last big adjustment.

I really try to screen as much as I can to get long term renters and with my limited experience with military and BAH rates, I’d prefer to stick with regular civilians, provided their income and credit fit.

@Luke Grogan, were you guard or reserve? Did you ever earn BAH or BAS?

We own 100 properties in Colorado Springs and manage 100 properties for others. Most of our tenants are military. We do have a high rental turnover because of it. But we always have zero vacancy because we have the tenants show our properties before they PCS to potential tenants. It works out really great.

Originally posted by Account Closed:

@Luke Grogan, were you guard or reserve? Did you ever earn BAH or BAS?

 I was active duty as an officer. BAH and BAS were good, but not great (at least at the time in a strong and rising market). 

My limited experience was that when I rented to military, it was market rent, but not pushing the market. The biggest factor was two months of vacancy to turn my home and I got short notice that the tenants were leaving. 

Multi family may be different, since I did SFR just outside the base in a newer development.