Active Duty Military Investment Psychology

[James Marszalek]

Man... If only I knew what I knew now when I was active duty, my life would be a lot different right now. But at the end of the day, you don't know what you don't know! 

Here's the fact: Active Duty Service Members have a strong competitive advantage in the Real Estate Investment Industry. 

If you're active duty, I'm going to speak directly to you now. Here are some things for you to consider: 

- You have access to the VA Home Loan, which can be used for multi-family properties as well as single family. 

- THE GOVERNMENT PAYS YOUR MORTGAGE (BAH)

- You are only required to occupy the property for 1 year before you are eligible to rent it out. (VA)

- You are generally a prime candidate for mortgage acceleration tools like simple interest revolving lines of credit. 

- By the time you PCS or ETS, you can have passive rental income being generated on a monthly basis. 

- By the time you leave the military, you could have a massive chunk of equity built, and a great monthly income to help you transition to your next path. 

- A Real Estate Portfolio can be much more powerful than a retirement plan. 

If I could go back and do it all over again, I would have done things much differently. I would have utilized the tools given to me and purchased a multi-family property at each duty station I went to. After 2 years of receiving that rental income for each property, I can now count that income when I apply for financing on the next one. Not to mention, the mortgage acceleration tools I use now would have allowed me to completely have paid off my first property by the time I ETS'd. The greatest thing about this whole situation is the Army would have paid the majority of the mortgage down. Fort Wainwright and Fort Lewis alike have above average BAH. In most cases, soldiers want to find a property that rents (or get a mortgage payment) for less than what the BAH is, that way they can pocket the excess. I would have snowballed my mortgage acceleration by putting the excess cashflow from BAH into the principal of the mortgage through my line of credit. 

I could have come out of my 7 year military stretch with an 800+ credit score, and so much passive income I wouldn't have even had to go get a job. Instead, I could have continued to build my portfolio, and pursued my passions. 

If you are or have served this country, thank you for your service. I take the words "brothers and sisters in arms" very seriously. If I was sent a plane ticket back to the desert, I'd being going in a heart beat to support the operation! Be safe out there, and please learn from my experience! Set yourself up for life while you still have the advantage in your corner! 

This was taken just South of Kirkuk, Iraq in 06. 

[James Marszalek]

@Travis Callihan, we have a base in Ohio? I felt the same way when they told me I was going to Fort Wainwright Alaska. What the heck is in Alaska you ask? Well, aside from the porch that Sarah Palin can see Russia from, it's just a lot of snow and ice. Good luck with your PCS, brother. 

As far as mortgage acceleration, you'll need to get a simple interest revolving line of credit (LOC) from a bank. Not all banks offer that product, but ask around and see who does. Credit unions are usually the best.

Basically, you start with whatever amount you're qualified for. Let's assume for this argument it's $5,000. So you call the bank that holds the note on your mortgage, and tell them you want to make a $5,000 principal payment. If you did this on month 1 of the mortgage, you're effectively jumping the payment schedule from month 1 to month ____, whatever $5,000 gets you. (The actual schedule will be printed out with all of your loan docs). All the interest you would have paid to the bank between month 1 and month _____ is now saved. 

Now, you've jumped the mortgage payment, but your still have the $5,000 balance on the LOC. Instead of direct depositing your income checks into your checking account, they now get dumped into the LOC, where you can pay all of your bills from as well. The LOC effectively replaces your checking account. So you've got a scenario where you're affecting the LOC with income twice a month. The credit companies see this as a payment, which boosts your credit, and once the LOC is paid off, you do it all over again, leapfrogging the mortgage payments.

Eventually, the bank will come to you and raise your limit, or you can ask for it every few months. The bigger your LOC limit, the faster you can attack the mortgage. Eventually, you can swallow the entire mortgage into the LOC and your mortgage payment goes from whatever it is (let's say an avg of $1,400) to $200-$300, because a LOC is interest only. It's a genius strategy to significantly reduce the interest you're paying on the property, boost your credit, and pay down the property in 1/3rd the time on avg. And if you're also affecting the LOC with the total BAH, it snowballs even faster.

Now let all that soak in for a minute. This, more than anything in real estate investing, fires me up so much. This is a tool that's been around for a long time, but people would rather pay out $625,000 for a $300,000 house because they're cool just paying the mortgage over 30 years. I see that as highway robbery. Don't get me wrong, I don't have $300,000 cash to go buy a house, so a mortgage was necessary. But that doesn't mean I can't affect it, keeping hundreds of thousands of dollars in my pocket! Hit me up if you have any other questions!