However you make the choice, whether you plan it or because you’ve been redeployed without the chance to sell your home, renting out your property has some money benefits—especially for military members. But there are also some problems to tackle. Here are some important points to think about if you’re considering becoming a military landlord.
Financial Benefits
Everyone, no matter their military rank or branch, can gain from extra money. When you rent out a property for more than it costs you in expenses, that’s additional cash you can keep. Plus, the people renting from you will essentially pay off the property’s mortgage for you.
As this occurs, and as the property’s value goes up, you’ll build equity—which you can use to buy more properties. You can get this money through a cash-out refinance. And the good part is, you won’t have to pay capital gains taxes like you would if you sold the property for a profit.
Utilizing VA Home Loans
The regulations for VA loans don’t allow buying properties specifically for renting them out as investments. But you can buy a home, live in it for some time, and then rent it out later. Military members can also use VA loans to buy multi-family properties with up to four units, as long as you live in one of them. These options let you get rental properties without putting money down.
Practical Issues
Before you think that making money from rental properties is easy, there are some important things to remember. One big task is managing the property. You’ll need to find renters, make sure they’re suitable, move them in, and handle any maintenance issues that come up.
Some military members decide to hire property management firms to handle these jobs. However, this can cut into your monthly rental income by 8 to 12%. Some management companies also charge fees for finding and placing tenants when there are empty units.
Since you might not always be around if you’re still serving in the military, you’ll probably need to hire a management company to deal with everything. Another option is to do the advertising and tenant stuff yourself and hire a local handyman for maintenance.
Strategies for Success
Think about your main objective.
Are you planning to keep the property for a while as an investment? Are you waiting to sell it until its value goes up? Do you have a certain amount in mind that you want the property to make before selling? Either way, it’s crucial to treat it like a business.
Ensure that you have open communication with your tenants.
Make sure they can contact you, your property manager, or your maintenance person in case of an emergency at any time.
Establish clear guidelines.
Your rental contracts should clearly outline the responsibilities regarding the property. Who covers expenses for different issues? Are you or your tenant liable for repairs if something gets damaged? Who will handle specific types of preventive maintenance?
Regularly check the property.
Regular inspections should happen at set times, decided on beforehand by both you and the tenant. You or your property manager should go to the property at least once a year to make sure everything is okay. This can help you spot any issues early on before they get too costly to fix.
In Summary
This quick guide about becoming a military landlord gives you an overview of what to think about before you start. For more detailed help, check out Veteran.com and TheMilitaryWallet.com.