Military housing has garnered increased attention among real estate investors in recent years. The allure of a stable tenant base, guaranteed rent, and potentially higher property appreciation has piqued the interest of many looking to diversify their investment portfolios.
Investing in military housing can be a great strategy, whether you’re new to investing in rental properties or have some experience under your belt. Even though it does have a few negative aspects to consider, there are several reasons why you should at least think about it if there is a military community relatively close by.
Let’s delve into the potential of military housing investment, exploring its advantages, challenges, and the key factors that make it an attractive option for savvy investors.
Advantages of Military Housing Rentals
1: Basic Allowance for Housing (BAH)
All service members not housed in military bases or government quarters receive housing cost assistance while stationed anywhere in the United States. Depending on where bases are located, allowances can range from $1,000 to as much as $3,000+ subject to rank and paygrade. Those with dependents also receive a bigger amount, while those in areas like Chicago, NYC and Hawaii get higher BAH rates due to higher living costs.
2: Stable Tenant Base
One of the primary attractions of military housing investment lies in the stability of the tenant base. Military personnel are often assigned to bases for fixed periods, typically ranging from a few months to several years. This predictability reduces the risk of extended vacancies and provides a steady income stream for landlords. The consistent demand for housing from military families seeking temporary accommodation near their assigned base can help maintain healthy occupancy rates.
3: Steady Paycheck
Federal employees have perhaps the best source of payroll available. Unlike any commercial or industrial company, the U.S. government isn’t likely to shut down anytime soon. As a landlord, the consistency of your tenant’s paycheck is probably important to you, right? After all, if your tenant is laid off (which rarely happens to military,) they can’t pay rent.
4: Good Pay
Military employees are paid fairly well. They aren’t exactly bringing in the high dollars made by investment bankers, but the government realizes it needs to pay its people fairly. Otherwise, they would lose even more personnel to defense contractors each year.
So why do military choose to rent if they are paid so well? After all, if they can afford to buy, you might argue they’re leaving money on the table. Well it’s largely because…
5: Military are Transient
While this can also be a disadvantage (depending on your perception), you’ll see the fact that military personnel are always coming and going into a community. That means many potential tenants are looking for a place to rent at all times.
Because they know they’ll only be there for a few years, most military decide not to purchase their home. Buying a home is a hassle, just like selling it can be a headache when they move away. That’s why you probably won’t run out of military tenants looking for rental properties. In fact, the supply is always so low that a great rental home usually has military tenants under contract within days in today’s market.
6: The Military Support System
Investing in military housing opens up a window to the military lifestyle. Many people don’t realize that simply being in the armed forces affects every aspect of someone’s life, unlike most civilian jobs.
For example, let’s say your tenant is in the military but doesn’t pay rent on time. You can actually call their organization on base and talk to their commanding officer about it. Chances are good that you’ll get your money soon afterwards! And even if the person is having financial difficulties, the base likely has an organization to lend money to help the person get back on their feet.
7: Property Appreciation
Military bases are integral to their local economies, and any expansion or upgrade to base infrastructure can have a positive impact on nearby property values. Over time, the property appreciation potential near military bases can offer investors significant capital gains, especially in areas experiencing rapid economic growth and development.
8: Property Management Support
Investing in military housing can be more manageable with the assistance of specialized property management companies familiar with military tenant requirements and unique regulations. These management firms can handle tenant placement, property maintenance, and ensure compliance with military-specific lease agreements, alleviating many of the logistical burdens associated with rental properties.
Disadvantages of Military Housing Rentals
So there are a lot of great reasons to rent your property to military members, but nothing is perfect, right? Here are a few negatives to think about before pulling the trigger.
1: Military Personnel Get Reassigned
Again, people in the military are constantly on the move. The transient nature of military life can result in more frequent tenant turnover. This means you’ll probably be looking for a new tenant every 2-3 years. Even though this gives you a window to raise your rates for the next tenant, it also means you may have some brief vacant periods. Investors must also account for costs associated with finding new tenants, such as advertising and property cleaning or repairs between tenants.
2: Overseas Deployment
If someone in the military deploys overseas and has to break their lease, you may (depending on the state) be obligated to let them go without any kind of penalties. Landlords renting out properties to service personnel are required to include a military clause that allows the tenant to break a lease agreement and have security deposits returned if they are called to duty or must relocate.
3: Property Condition
Just because someone is in the military doesn’t mean they’ll take amazing care of your home. They may still make a mess, so make sure you take a security deposit! This is particularly common among younger or unmarried service personnel who may share a rental home among themselves. Their credit may not be also be good, so a credit check is still a very good idea.
High tenant turnover can also lead to increased wear and tear on properties. Regular inspections and timely maintenance are crucial to preserve the property’s condition and maintain its value over time.
Military housing investment heavily relies on the stability and continued presence of military bases in the area. In the event of base closures or significant reassignments, there may be adverse effects on the local rental market.
So is investing in military housing worth it? It’s personal preference, similar to any investing strategy. It seems the pros outweigh the cons, investment-wise, but there are also some humanitarian reasons to consider when thinking of providing military housing.
Think about this—if you have a rental property where there are military bases nearby, you can be instrumental to providing a military family the security and stability they need. It’s not easy moving multiple times, and every military member will want to enjoy the comfort and luxury of a nice home. Furthermore, if you want tenants working for a stable employer and a steady stream of new renters over they years, military housing is a great investment opportunity to consider.
Overall, military housing investment holds considerable potential for investors seeking a stable income source with long-term appreciation prospects. The combination of a stable tenant base, guaranteed rent, low vacancy rates, and potential property appreciation makes it an attractive option.