Those who have served our country and who enjoy the designation of being a military veteran have unique opportunities when it comes to real estate ownership and investing.


Most have heard about no downpayment, 100% financing, no Private mortgage insurance (PMI) requirement, no loan limits, and prime interest rates. While substantial, many veterans have not considered using their benefits beyond standard home ownership. For savvy veterans, however, there is the opportunity to parlay these benefits into long-term wealth through real estate investment strategies.


In most cases, veterans who are still active military have access to “Basic Allowance for Housing,” often referred to as BAH. While most choose to take this allowance and give it to a landlord, this overlooks the opportunity to have the military buy them a home, multiply that gift into future equity, and compound their benefits into future wealth.


As stated, using your VA benefits for investing can be considered a long-term wealth-building strategy. Here it is essential to understand when a veteran seeks to buy a home, they are doing so under the understanding it is to be considered their residence. Under VA guidelines, the veteran thus intends to live in the house for at least one year. The typical military rotation lasting three years, however, allows the knowledgeable veteran investor to enter into 2-3 easy flip homes and maximize their investment opportunities while staying within VA guidelines and without sacrificing benefits.


After the one-year mark, veterans can again purchase a new residence under the VA loan program. For most, this means selling one home and then buying a new one. For the veteran investor, however, there is a different mindset. After one year of ownership, a veteran can convert their residence into a rental and utilize up to 75% of the rental income to elevate their real estate financing power. Or they may choose to sell and take on a new home to slow flip. The caveat under a rental scenario is that for rental income to be considered in the debt-to-income ratio for future loans, the property rented has either a two-year track record of rental, proven by tax records, or the property needs to be managed by a qualified property management company under a qualified signed lease.


The alternative to rental is flipping. But not the standard model of flipping most people think about. Almost everything you read on flipping, hear on television, etc., is contrary to making flipping feasible for the military veteran. Quick in and out; that is a no-go. Buying dilapidated and fixing up, again, a no-go. The two primary factors that hold most veterans back from being traditional real estate flippers are the VA residency requirement and the “safe, sound, and sanitary” rule. According to the conventional real estate flipping mindset, flipping using VA benefits does not pair well.


So how should a veteran who wants to maximize their benefits and also flip real estate work the system to their best advantage? The first is to throw out the traditional quick flip and mass reno mindset.


While quick flipping and mass reno are the traditional flip model, it is important to understand the why. As often is said in the flip industry, time is money. At the root of this concept is most flippers are working on borrowed money. The longer you borrow, the more you pay, and subsequently, the less profit you make. Flippers do not typically live in their flip project, especially those needing mass renovations, so their mortgage does not provide the benefit of a roof over their head. So for them, yes, time is money, and time lost is money lost.


For the veteran flipper, they must calculate things differently from the traditional real estate flipper. Enter the slow flip model, which veterans can use to their most significant advantage. What is a slow flip? This is a flip project that takes a year or more to complete. As long as the flip happens before the next rotation begins and out-of-pocket expenses are well managed, all is good.


In most flip projects, a huge portion of the potential profit is lost in paying skilled labor to complete renovation projects. Because traditional real estate flippers are paying a mortgage on a flip, they must weigh how long each individual reno project takes and balance their time between contract labor and DIY to minimize overall repair costs.


As a veteran slow flipper, you are under different time constraints and, subsequently, not under the same stresses typical flippers face. As a slow flipper using VA financing, your strategy is to find properties that do not require renovation but instead would benefit from them. In a word, upgrades. New flooring, modernized kitchens and baths, and expanding living space through finished basements and garages. All projects that can be completed on an extended time frame and, in most cases, can be managed under the DIY model, thus saving considerably on contract labor.


So, in this process, veteran slow flippers must ask themselves whether they have the skills to tackle a project. Honestly, it is not so much about the skills, as everything can be learned today using resources like YouTube, DIY forums, and watching shows like This Old House. DIY is more of a mindset than a skillset. So, the question is, are you an “I can do person” or an “others can do for me person”? If it is the latter, no flip model will work for you, and you should seek other investment alternatives that are more passive in nature. Flipping is ALWAYS hands-on. If you are unwilling to get your hands dirty and/or are not self-motivated to finish projects, flipping in any scenario is NOT RIGHT for you.


If you are a veteran looking for a home, looking to invest in real estate, or looking to flip, contact us at Spruce Roost. We are ready to work with you to help you find the best real estate options to fit your needs.