Does anyone have advice or experience with investing near military bases?

Hey Peter, great question!

I don't invest near military bases and here is why:

The government provides a lease termination benefit to members of the military in lieu of getting deployed or changing bases. Long term this may be a hassle.

Another downside is there is a high turnover so you can expect a little more wear and tear and expedited maintenance on your end.

Lastly, housing can get expensive and there is plenty of competition in these markets. (Nice if you're the seller though!) 

Long term I want something I don't have to constantly fix and get new tenants in. But every investor is different.

If you have any other questions don't hesitate to contact me!

@Peter Thirawankanok

I currently invest in two military markets—one in Louisiana and the other in Alabama. If you're looking to purchase an investment property, I would first look closely at the units stationed at the base. For example, my Louisiana property has a tenant that will be renting for over two years due to the job descriptions. Other bases have high training demand, like Fort Benning. These locations run the risk of shorter tenants. 

Second, once you run your numbers, it is easy to establish a price and target a specific rank. Because the military has a set basic housing allowance or BAH, you can better filter your military tenants than a traditional tenant. 

Third, from my experience in the military, every location is different. Find the demand in the market and target that. Also, most military families, at least for the SFH markets, place a high demand on the best schools. Target the homes near the best schools.

Sorry, kind of all over the place, but glad to answer any other specific questions you have. 

Very Respectfully 

Josh

Hey Peter!

These guys before me are both absolutely right! I own one property in the military city of San Diego. In my experience, rent prices are high with an even higher demand. BAH rates more than cover the high rent prices here which gives me room for future rent increases. This is my first year, but had four applicants within three days of listing.

The only downside I foresee is the potential for higher turnover rates, but in my experience, military members are stationed in places for a minimum of three years. So, a could quick turnarounds to avoid vacancy time is my biggest concern.

V/r,
Riley Way

I invest in a military town in Alabama. I love it! I’ve got a great property management team that has a relationship with the housing office on base. While I typically see turnover every year and a half to two years, there is always someone coming in to take their spot, so my vacancy is dependent on how long it takes to clean and prep the property for the next tenant. Like it was said before, each base has a specific purpose and catering to the service members in those job specialties can have a direct impact on the care of the property. If you ever have an issue with the tenant, you have their boss to go to correct the issue and it’s easy to garnish pay if it ever gets to that point. Military towns are great for investors!

We have had our high end SFR occupied by Coast Guard Chiefs etc for going on 14+ years. The turnover is seamless & they network to those coming in for 4+ year tours. Great bunch of guys & we have never had to do any maintenance as they take care of it all & when a huge tree came down we didn't even know about it until the crew had it cut & stacked. The rental income from that home covers ALL operating expenses & ALL those of our principal residence.

@Peter Thirawankanok , I have multiple properties in various military areas across the country: Fort Drum NY, Washington DC metro area, Marine Corps Base Quantico/Fort Belvoir Army Base, San Diego CA.  I love military areas.  The need for housing will always be there, the rental amounts are predictable because they are tied to BAH, the tenant base is high quality (I know there are always exceptions), and there are usually other industry reps in the area whether they are tied to military procurement or not.  People will always point out the Base Re-Alignment and Closure (BRAC) possibilities, but that is usually predicted 5 years out, so you will always have time to think through what to do in that scenario.  People always seem to point to high turnover rates, and while I agree that they can be slightly higher than other areas, I think if you actually sit down and evaluate the turnover rate, as I have done, you will realize that it is only slightly higher in military areas.  Additionally, because military members typically know when they are PCS'ing (usually a minimum of five months) but more predictably sooner, your PM can get into the house, get a scope of work to get it prepared for re-rent, market it and have new tenants ready to move in within a week or so.  In fact, I have properties in northern Virginia that have been rented to multiple military members since 2009 and I haven't had a single vacant day!  That is what a good PM will do for you......

Good luck and feel free to reach out directly with any additional questions.

@Peter Thirawankanok , check out this thread from a couple of years ago.  I have two posts in it that might help you feel more comfortable investing in military areas.  Good luck!

Getting started in Jacksonville, FL (biggerpockets.com)

@Peter Thirawankanok

I am actually AD military, a REI and a realtor. I have a lot of insight on the market around my area.

Higher rent, higher turnover, but fairly decent tenants on average.

PM if you want to talk.

@Joel Calkins some misconceptions I think you have:

1. The military clause is useful for military members who get orders, but for the most part it is not abused by those serving. And, there is still rules—members can’t just up and move and leave you hanging for rent.

2. Most military members (unless in training) are going to be stationed at a base for 2+ years. More likely, longer for most career fields.

3. Military are accountable to the UCMJ and they have to pay their bills to keep their security clearances. They are also accountable for security deposits under the same rules and if one destroys your home, you can reach out to the base. Military commanders have a lot of lead way in holding their subordinates accountable.

Yes, the market is more competitive, but vacancy rates are always low. Houses go for me, but rent is comparatively higher.

@Ryan S. wrote a few solid blog articles going over the positives and negatives. They are attached below. At the end of the day each market and real estate investing strategy will have upsides and downsides and you will have to analyze and accept some level of risk. I love the Jacksonville, NC market for many of the same reasons listed above. 

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

@Peter Thirawankanok    there are some good points above .  A couple of other points to consider  .   

There is a difference between a military town , and a town  that has a military base near it.  San Diego  , Colorado Springs, Washington DC, while having a big military presence - have other factors that drive commerce and growth .  Some trinitary towns , ie  Fayetteville NC or Killeen TX,     

For  military towns , PCS season will   have a-lot to do with your vacancy rates.  If your rental becomes available  during the fall winter months , you may face a long vacancy period as there are not as many people transferring into the area as during High move season. 

Is the  base  Operational or Training .  Training will see a lot of students   move in and out , while Operational bases,  personnel may be there for 2-3 years , but stand a good chance to get deployed in that time. 

Lastly  since most of the demand is transition based and not growth based , while you may have a string rental and cash flow market, the long term appreciation  will not be there  .  Military units are set in numbers and do not organically grow  over time  unlike civilian companies that have ben in business 20-30 years 

  

@Peter Thirawankanok I buy rentals and do a decent amount of wholesale deals near Fort Bragg, NC.

@Peter Thirawankanok Here is an article I wrote for the BiggerPockets blog about the pros/cons of investing near military bases. hope this helps: https://www.biggerpockets.com/...

Originally posted by @Kenneth Hynes :

Lastly  since most of the demand is transition based and not growth based , while you may have a string rental and cash flow market, the long term appreciation  will not be there  .  Military units are set in numbers and do not organically grow  over time  unlike civilian companies that have ben in business 20-30 years 

  

I'm going to respectfully disagree with you here Ken. Real estate markets with military bases can and do see appreciation over time, and I'm not just talking about markets like San Diego or Hawaii. If we are talking about towns that rely significantly on their bases, then appreciation might be restricted, but that's why it's important to invest in areas that don't just rely on the military presence. Investors should seek out a diverse economy! 

Also, military units do indeed grow over time. The numbers are set by annual budgets, however those budgets can increase and decrease depending on what the military needs. For example, Unmanned Aircraft Systems (UAS) is growing significantly within the DoD right now, so we're seeing more and more money budgeted for those programs, which means more money for contractors, more money for commands that man, train, and equip for UAS, etc, and more active-duty personnel assigned to those units. This will certainly affect the real estate markets in the areas where UAS has a presence. 

@Peter Thirawankanok

We have a 4-plex near Ft Hood in Killeen. Killeen is definitely a military town but I would say the majority of our tenants have been non- military. We have not had any issues with military deployment or transfers.

That being said we have held off buying any more properties. I’m a little uncomfortable investing in a town so dependent on a single employer.

@Pete Harper You should try getting ahold of the base personnel/admin center, and/or manpower section, to see if the base is planning to expand or contract over the next few years.

@Peter Thirawankanok - Military renters are great! You do have to make sure that you're affordably priced, but military renters are on time. If you're not getting paid, you call the CO and the problem goes away. Yes there is high turnover, but I've never had an issue with anything outside of normal wear and tear to maintain. 

Thank you all that responded. There has been a lot of info that I have had to learn and research regarding this niche and everyone has some great points that were addressed. To be clear, I am not just looking to rent to service members, but also non-service members. I like the thought that service member are "better" tenants. 

I don't mind the turnover, because it seems that as soon as a property is available, they get rented fairly quickly. I also know that most military tend to really take care of the place as their own. Again, there are always exceptions, but I did not know that I could contact their CO to remedy tenant issues.

In regards to appreciation. What could affect appreciation? (either up or down). Would it be because of the neighborhood? I have noticed that some neighborhoods tend to be "C"-"B-" areas. Is there not a lot of diversity in military neighborhoods/cities or in the surrounding areas?  For me, appreciation is more of a bonus for providing solid housing.

For those that have active investments, how did you come across your properties? Do you invest out-of-state? What about PM?

Thanks again for all of the info. I may be reaching out to some over the next couple days to continue to pick your brain as I continue to narrow my niche.

@Peter Thirawankanok

Some military locations are very rural and are solely dependent on the military jobs the base provides. For example, Fort Polk, Louisiana, has over 20,000 locals employees and consists of over 70 of Leesville's job market. The appreciation for these locations is slow and can take a big hit if the market were to turn. Other larger military bases have a much better job market off-base, but it will be challenging to find deals. For example, we purchased and sold (stupid) a home in Lacy, WA, in 2012, and the home value has risen significantly. You have to pick your poison. 

I have chosen one property on-site and one from a long distance (CA to AL). I use a property manager, but this is because both my wife and I have W-2 jobs. Specifically, my job demands a lot of weekly hours and travel. 

Sincerely 

Joshua

@Peter Thirawankanok - just make sure that you pick the right base to invest near. There are many military installations that could be subject to another BRAC. As for me, I invest near Fort Bragg, NC and sleep well at night knowing that it’s not going anywhere in my lifetime.

I’m a vet and own homes near a few bases. My company, Gray Line, also sells a lot of rentals near military bases. I think there’s a lot of great advice here. We definitely look for the bases to be permanent installations like fort Bragg which was mentioned and I also focus on places where there is some diversity of employment. Fayeyeville, Clarksville, Fort Myers all have another show in town besides the military which increases the odds of long term appreciation. Vacancy tends to be very low if you keep the home in good condition. A piece of advice I have is to research BAH and housing allowances and ensure you are actually renting to your target demographic. If you go to fort Bragg and buy a 40k house renting at 500 bucks you really aren’t renting to a service member. That’s more your standard class C and D rental that you can find all over the country. Just know your customer:)

Just like any single family purchase I think you still need to focus on buying at a discount. never pay retail!

The only downside I foresee is the potential for higher turnover rates, but in my experience, military members are stationed in places for a minimum of three years. So, a could quick turnarounds to avoid vacancy time is my biggest concern.


But, I think you already addressed this fear with having multiple applications in a single day. There may be a higher turnover, but you also have a near guarantee of new tenants quickly. "PCS season" is a thing (at least in my branch) and that helps to know when you may see a turnover. Also, finding a PM that does not charge an exuberant amount for tenant placing is a must.