Military town rentals... Good idea? What to look out for?

Question

Hello BP!

I've been looking at out-of-state investments and have been very interested in SFR within a 30 minute drive of large military bases, specifically in Fayetteville near Ft. Bragg / Pope Field.  I'm looking for input on what to be cautious of and folks who disagree with this strategy.

Thoughts?

Thanks!

Matt

Kevin Hunter · Answer

@Matt Gilroy, welcome.  I invest in military towns and have had a great experience.  I am active duty military currently, which is why most are near military bases, although I invest elsewhere as well.

Get real smart on the laws regarding military tenants before you start.  I would suggest you read and understand the SCRA (service members civil relief act).  This will help you to know what you can and cant do, and what your military tenants can and cant do.

I really like that you can tailor your investment strategy to certain groups of individuals based on things like BAH rates, etc..  Check out a post I wrote on this topic a while back.  I think it will give you a lot of information that you are looking for.....

https://www.biggerpockets.com/forums/552/topics/400720-getting-started-in-jacksonville-fl

Alexander Felice · Answer

I invest exclusively outside of Fort Bragg

The only benefit of buying in a military town is it can be somewhat insulated from economic downturns.

the detriment is military towns are generally stagnant. No appreciation, little to no growth, and military tenants are not inherently better in any way over civilian tenants.

In the last few years Fayetteville has become VERY competitive, and while lots of money can still be made there, the margins are certainly shrinking. People just now getting in the game are overpaying, rates are rising, and inventory is far more scarce. That said, these are conditions that are similar to many other small towns around the country so it's as good a place as any to invest.

Kevin Porter · Answer

@Matt Gilroy I'm a current service member, having spent 2009-2014 at Fort Bragg.  I have 2 SFR there currently.  I like that rental market for the guaranteed income that comes with being a service memeber, and there is usually a higher volume of renters in the market.  But with that being said, just as @Alexander Felice had mentioned, appreciation is just not happening which has had me thinking about selling. I haven't had a vacancy longer 2 months at any time, but I have experienced turnovers a little more than I prefer.  I don't have properties in any other market so my experience is limited to only Bragg.  Good Luck and message me if would be interested either of my deals.

Kevin W. Porter

Andrew Major · Answer

Hi Matt,

I am a noobie investor, but I am in the military and know a lot about it.

1. Look up the BAH (Basic Allowance for Housing) for your zip code around the area.  You can look it up easy and there will be tools.  This is how you can have a baseline for rent and what your tenant should be getting to base your rent and looking at the market.

2.  Military members stay for 3-4 yrs for every assignment then move on.  Fort Bragg is a high op tempo base and will have people always moving in and out. So you have a constant demand.  The only risk is if the base reduces size or shuts down.  Which Fort Bragg will never shut down, maybe reduce in size depending on the politicians.

3.  If they are on orders to deploy or go onto their next assignment by law they can break their lease without penalty.  Make sure they bring you a copy of the orders, and make sure you have the right systems and processes in your lease for how a typical military move out should be.

4.  Lower ranked military members are young and tend to be more immature.  On your lease get the contact info of their company command team.  If you ever have a problem you can call their first sergeant or their platoon sergeant (supervisor).

5. Like many military bases the surrounding town is normally small rinky dink with civilians trying to take advantage of military members (loan sharks, auto dealers, gang members, and drug dealers)  Your properties will probably be relatively stagnant due to it only being a military base.

LMK if you have any questions

Matt Gilroy · Answer

@Kevin Hunter Great post! I've done a lot of research regarding BAH in the area but I have not read the SCRA.  Where are your properties at?

Nathan Gesner · Answer

A military renter will typically stay put for 2-3 years so you get stability. You also won't see a military renter tell you their hours got cut at work and they need to negotiate a reduction in rent. When they leave, another soldier can take their place. If you are a good Landlord and the home is nice, you should have no problems.

If you ever have a problem with your renter, a quick call to the housing office or his/her First Sergeant may fix the problem quickly. It helps to have a military background and know who to talk to and how to talk to them. I've seen businesses that couldn't get money out of a soldier but one well-placed call to someone in their chain of command and the soldier is handing over cash that same day.

Appreciation in military towns may be slower than average but you're probably focused on cash-flow more than resale value so I wouldn't worry about that. I also wouldn't worry about base closures because Bragg is a pretty solid bet.

Matt Gilroy · Answer

Thank you all for the replies.  Knowing that turnover is a large downfall, how costly are most turns?  I would assume that military tenants are more respectful renters but that is only an assumption... I also know you can contact commanding officers and let them know about issues.

Knowing turnover is more often, isn't it true that they also rent very fast (generally speaking) and you shouldn't have too much headache getting someone else in?

@Kevin Porter If you're considering selling your rentals, let me know where they are and what you're thinking for sales price.  PM me directly :)

Robert Ware · Answer

Career military here... A side note your rental type dictates your customer. If you cater to higher enlisteds or officers they will pay rent, not doing so are career killers. If you have any issues like property damage or loud parties, better than calling the cops the chain of command will handle those for you. My experience as a one time squadron legal officer and frequent renter is that when a military member moves, they often refer another to your place. (assuming its a quality place) This is the only area I would consider renting in the upper middle class price range and feel comfortable.

Kevin Hunter · Answer

@Matt Gilroy, I have three properties in Northern Virginia, one property in San Diego, one property in the Myrtle Beach area, and two multi-family properties in southern Ct.

Military town rentals... Good idea? What to look out for?

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