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6 Reasons Why Active Duty Military Should Consider Turnkey Real Estate

eric upchurch
5 min read
6 Reasons Why Active Duty Military Should Consider Turnkey Real Estate

After college, I enlisted in the U.S. Army. I chose to become an enlisted member versus becoming an officer for two reasons: 1) it immediately paid off all my college debt (about $50,000), and 2) I’m an influencer by nature and knew I could make a positive impact on the lives of younger service members.

Throughout my time in the military, I noticed many troops had the same financial problems and made the same poor financial decisions. It wasn’t necessarily due to irresponsibility; these were elite soldiers. It was simply a lack of knowledge—on the parts of both the soldiers and their leaders!

To illustrate the point, one day a soldier who had recently returned from combat rushed into my office and excitedly explained that he had just used his hard-earned cash from deployment to buy a brand new $70,000 Z06 Corvette. It came with a $1,000 per month payment! I saw and heard stories like this my entire career.

Financial Illiteracy in the Military—and Beyond

Lacking financial savvy is a common thing among soldiers and civilians alike. Many Americans buy shiny things they can’t afford.

In most cases, people are buying liabilities instead of assets—and depreciating liabilities at that. In their defense, it’s hard not to buy things they can’t afford. Most aren’t taught the difference between assets, liabilities, and good vs. bad debt in school.

Unfortunately, the military doesn’t do a good enough job teaching financial concepts either. It does offer service members a Thrift Savings Plan (aka a TSP, which is similar to an IRA), but it’s often only explained through a short “death-by-PowerPoint” presentation in a stuffy auditorium. And that’s pretty much the extent of the guidance they’re afforded.

The nail in the coffin on service members’ chance at financial freedom are the car dealerships, pawn shops, and “fast cash” pay-advance businesses that are situated directly outside most military posts. But if we start educating troops properly, these establishments will be unable to take advantage of them.

I’m determined to improve financial literacy among service members. I won’t give up on my educational efforts until proper, thorough discussions about finance are taking place on military installations across the United States. And I truly believe real estate investing is one way both active service members and veterans can create a solid financial foundation—and even achieve financial freedom!

realtor hands keys to real estate investors

What is the Best Real Estate Investing Strategy for an Active Duty Service Member?

Well, it kind of depends. But I do know how busy life in the military can be. For that reason alone, any passive income-producing asset, such as a turnkey property, is likely the best option to get started.

There are a multitude of passive investment options, even within the real estate space. There’s private lending, crowdfunding (syndication), tax liens, first-trust deeds, turnkey, self-directed IRA investing, and more. I’ve used all these strategies personally, but the one that provides the greatest number of overall benefits is turnkey real estate—owning a renovated, tenanted, cash flowing, tangible asset.

Related: The Top 5 FAQs About Turnkey Rental Properties—Answered!

Here are a few reasons to take military pay and get it working for you now!

6 Benefits of Turnkey Investing

  1. “Passive” Investing: This is in quotation marks because there isn’t really a way to be completely hands-off. You’ll still have to run numbers, reserve the deal, close, communicate with property management, and make adjustments as the months and years progress. But for the most part, once you buy the property, there should already be a tenant in place and your property manager should already be collecting rent for you.
  2. Cash Flow: Monthly net income (cash flow) is the main reason to get into this asset class. You can expect 10 to 20% cash-on-cash return from a good turnkey (TK) provider. And stick to the 1% rule (renting the property for 1% of the purchase price) at least!
  3. Depreciation (Tax Benefits): I’m no CPA, but depreciating your rental investments is a tremendous tax incentive. Remember, the IRS doesn’t have “loopholes” for real estate investors. The IRS incentivizes behavior that the government wants to encourage. Real estate investors are providing safe, affordable housing, and revitalizing neighborhoods through renovations that increase property values. This is good for our communities and economy, so the government provides tax benefits to those who invest.
  4. Appreciation: Never invest in real estate strictly for appreciation, but it’s a GREAT benefit when it happens. Residential real estate can appreciate 3% per year on average, which increases your equity. But again, we do not invest for appreciation alone. That’s a risky game to play.
  5. Equity/Net Worth (Principal Pay-Down): We typically like these investments for long-term holds. As your tenant pays down your principal each month (through rent payments), your equity increases—and thus, your net worth. Pretty cool to think about.
  6. Leverage: These assets can be purchased by taking on good debt, which is debt accrued that results in a net-positive ROI. This means getting a mortgage that leaves you with less money in the deal than the lender. In other words, using other people’s money can mean higher returns for you.

military service member holding model home in hands

A Forewarning: Not All Turnkey Providers Are Created Equal

It’s important to note that not all turnkey providers are the same. Many will claim to have excellent rehabs, services, communication, processes, and management in place.

I know firsthand that this is not the case. When I started buying TK from various providers in 2017, I quickly discovered they each have their own spin. (I’m not here to bad-mouth any one company, but I will emphatically steer you in the right direction.)

Some TK operators have great communication and integrity. Others, I’ve found, can be somewhat the opposite. So, for military members, it’s CRITICAL that you find one that can keep up with the level of communication we need and expect.

Since we’re often traveling all over the world, we need to know in real-time what’s going on with our assets! Equally as important, TK providers need to follow through with their promises.

The money that we are investing is REALLY hard-earned.

More Investing Strategies to Explore

After separating or retiring from service, VA loans are available that can be used to, say, house hack a one- to four-unit building with ZERO down payment and without private mortgage insurance. The same can be done for active duty members, and I go into great detail about this in a book I co-authored called Military House Hacking: How to Live for Free, Earn Passive Income and Create Generational Wealth.

Related: 3 Strategies We Used to Live-In Flip Our Way to Success with the VA Loan

Further, while seasoned investors might tell you the BRRRR strategy is potentially the most lucrative investment for single family properties, there’s a reason I’d recommend steering clear (for now). When you have a busy life in the military with early mornings, late nights, training, and deployments, a more hands-off option like turnkey investing is an excellent method for service member-investors who are just starting out. When done right, it can serve as a passive path to real estate investing for beginners, while providing solid, long-term returns.

The most important things to remember are to get educated, start networking, and TAKE ACTION.

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Do you have experience with turnkey investing? Or do you need help choosing a TK provider?

Reach out in a comment below.

 

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.