Military and RRE-CRE

[Robel Nessro]

So I've been thinking of joining the Air Force for 4 years, during those 4 years I would buy 3-4 unit properties which later after the 4 years I can get into Commericial real estate by doing a 1031 exchange or getting loans from private investors so that I can buy bigger multi-family properties. Would that be a good idea or not?

[Dave Foster]

@Robel Nessro We've worked with many service men and women using this strategy. Given your mobility for duty posts you can really ramp up your real estate portfolio while serving.

Every time they got stationed somewhere they would purchase a property to live in using their VA and house hack. Then either keep it rented when they were deployed elsewhere. Or sell using the 1031 exchange along with a partial 121 primary residence exemption There is a way you could take advantage of the 121 primary residence exclusion allowing you to take the first $250k of the gain tax free ($500k if married) and qualify for a 1031 exchange.

Say you purchase a property as your primary residence (house hack extra rooms for extra income) and lived there for two years while stationed there. When you're deployed you keep the property as an investment and put a renter in it and rent if out for a few years.

As long as you have lived in the property for two out of the previous five years ( Two out of the previous ten years if you're in the military) you can get the primary residence tax free exemption. If you keep it long enough you don't qualify for the primary exemption (maybe it was too good of a rental to get rid of) it would still qualify for a 1031 exchange.

@Johnny Quilenderino was one of our clients who used this like a boss. And ended up 1031ing his entire portfolio to where he wanted to live when he mustered out. You can find him here on BP.

Great strategy.