Service members have many skills that lend themselves to entrepreneurship. Whether it’s adapting the tactical skills of the battlefield or their technical training to start a new career, there are plenty of opportunities for veterans to build substantial wealth in civilian life.

One field with tremendous potential for veterans is real estate. Between easier access to credit and financial benefits from their service, veterans have ample opportunities to invest in real estate.

This guide will discuss different real estate investment strategies veterans can leverage using their benefits to start building wealth.

Common Real Estate Investing Strategies

Several real estate strategies are available to veterans to generate passive income, but many may be modified based on your financing options. Let’s explore some common strategies based on their popularity among everyday investors.

  • Rental Properties: Rental properties offer steady income, and virtually any property can be used as a rental. However, if you use a VA loan for financing, you will need to occupy the residence for at least a year before using it to generate income.
  • Fix and Flips: Fix and Flips offer short-term cash flow through the sale of homes with high equity. However, VA loans do come with stringent requirements, including minimum standards, which make it hard to purchase properties in need of rehabbing.
  • Wholesaling: Wholesaling is a real estate investment strategy that doesn’t require a loan. Essentially, wholesaling involves purchasing and selling contracts on properties to other buys. Wholesalers collect a fee, thus turning a small profit.
  • Tax Liens: Tax lien investing is a low-cost investment that allows veterans to collect tax repayments at interest from an existing lien. There are some risks to this strategy, and it doesn’t yield instant wealth, but it’s a lower-cost, lower-risk strategy as compared to others.
  • REITs: REITs can be purchased over a public exchange and used to generate money via dividends and increased stock value.

When you invest in tax liens, earnings come from the interest applied to the lien

Financing Options

Ultimately, the real estate investment strategy you choose will be based on your risk tolerance and method of financing. If you have poor credit or low funds, you may need to start with wholesaling or tax lien investing. But if you have good credit and ample savings, you can explore any of these financing options.

VA Loans

VA loans are administered by the Department of Veterans Affairs and offer favorable interest rates and closing costs to eligible veterans and service members. VA loans also have low down payment requirements, with some loans requiring zero money down, which makes them great for investing.

Unfortunately, VA loans have more stringent requirements, including occupancy and minimum standard requirements. However, these requirements can be bypassed using modified strategies, which we will outline below.

Personal Savings

Another financing option could be using the personal savings you’ve accrued through service or at your current job. Your savings could be used to finance a conventional loan for investing or even purchase low-cost homes in need of rehab outright.

Using Your IRA

Another form of savings you can leverage to finance an investment project in real estate is your retirement account. However, to invest in real estate with retirement funds, you’ll need to roll over your IRA, 401(k), or TSP to a self-directed IRA.

Self-directed IRAs allow you to invest in real estate using post-tax dollars, meaning you’ll never pay a dime on taxes from any gains. There are some prohibited transactions, such as having to hire a contractor for all improvements, but it provides a highly lucrative path to early retirement.

Crowdfunding and Partnerships

Crowdfunding using other investors, including fellow service members, is a great way to acquire funds for a real estate project and release yourself from the constraints of loan requirements.

Hard Money Loans and BRRRR

Known as “Buy, Rehab, Rent, Refinance, and Repeat,” BRRRR is an investment strategy that uses cash or hard money loans to finance purchases, repair homes, and refinance them to get your money back. It’s a highly lucrative strategy but requires great technical skills–something any service member should be suited for.

Infinite Banking

Infinite Banking is an ingenious financial solution that enables you to borrow against the cash value of a whole life insurance policy to avoid going through your bank. This technique requires you to build your policy’s cash value and comes with higher rates than term life insurance, but it can be a great way to access capital.

Tips to Leverage Veteran Benefits to Invest in Real Estate

This section will focus on using specific veteran benefits to help jumpstart your real estate portfolio.

House Hack with a VA Loan

One way to bypass occupancy requirements with a VA loan is by purchasing a multifamily property. This allows you to split the rent with other tenants for no money down to offset your rent or a portion of it.

Plus, once your occupancy requirement has passed, you can take out another VA loan and repeat the same strategy, using the first property to generate profits.

Purchase Multiple Homes with a VA Loan

Similarly, you can purchase multiple homes with a VA loan using your entitlement. For example, the VA will guarantee up to $36,000 on a $144,000 home. However, due to the rising costs of homes, the VA will allow people to purchase homes at 4x the amount of the entitlement ($144,000), or $576,000. So, if a veteran purchases a home for $300,000, this means they can still use their entitlement to purchase another home with no down payment for $276,000 (the remaining amount).

It seems complicated, but it allows you to purchase one home to dwell in while purchasing another to generate income to offset your rent.

Report BAH as Income

Investors can use their monthly allowance from the military–if still applicable–to help qualify for better loans on higher-value homes. While your monthly allowance will stop when you cease military service, it can be valuable in securing a loan on a high-value rental or fix-and-flip you wouldn’t ordinarily be eligible for.

Modified Flipping

Since VA loans do come with minimum standard requirements to ensure homes are in good condition, veterans who want to flip homes with a VA loan may be out of luck. However, by dwelling in the home and making improvements that raise the value, you can perform a modified flip as long as the market continues to rise.

Leveraging Your Military Experience

Real estate investing involves a lot of problem-solving, which is something that veterans are well versed in. Leverage your technical skills to assist in your career and your military background to apply for better credit.

There are also several educational programs offered by DoD and other organizations designed to help veterans become better integrated with entrepreneurship.

So get out there and see which real estate investing strategies are right for you.

FAQs: Real Estate Investing as a Veteran

What’s the difference between active and passive real estate investing?

Active investing involves hands-on management of properties, while passive investing often involves investing through Real Estate Investment Trusts (REITs) or crowdfunding platforms, where professionals manage properties on behalf of investors.

What’s the advantage of using a VA loan for a multi-unit property?

Using a VA loan for a multi-unit property (up to 4 units) can allow veterans to live in one unit while renting out the others. This rental income can help offset the mortgage payment.

Are there restrictions on renting out rooms in a property purchased with a VA loan?

Yes, you can rent out rooms in a property purchased with a VA loan, but the property must still be your primary residence. You cannot solely purchase a property to rent out all rooms while not residing there.

Are there tax benefits for veterans who invest in real estate?

Real estate investors, including veterans, can benefit from tax deductions on mortgage interest, property taxes, and certain property-related expenses. Consult a tax professional for accurate information.