Managing rentals can be a challenge. If the community your rental is in doesn’t have a high volume of likely renters, such as a college town or major shopping center, it can be difficult to fill vacancies. That’s one reason some property management gurus recommend buying rental properties near military bases.
“I’d get online and find all of the military bases within a 60-mile radius of your house. Then find the quality neighborhoods that are close to the base, buy a mailing list of absentee landlords and start a direct mail campaign,” advises Jason Hanson, a writer on BiggerPockets, a social network for the real estate investing community.
The good news: military members get a housing allotment each month, so landlords know the rent money is there. However, like any other member of society, some people may decide to use a portion of that allotment to finance a new car or for other purposes.
If that happens, many landlords recommend requiring the name and phone number of the tenant’s commanding officer, as a phone call to him or her may help clear the matter up. It’s a good idea to check that the number works before signing a lease or rental agreement.
Some landlords require a credit check for new rentals; this is another way to foresee potential problems with rental payments, no matter who rents the property.
The pros of military tenants
Military tenants are often neater than other tenants, and some units require regular inspections of both on- and off-base housing. Depending on the unit, the reason for this might be simply for leadership to familiarize themselves with the places their unit members are housed, in the case of an emergency. For others, the intent is to check that the off-base housing is not in a derelict area of the community.
The cons of military tenants
For many landlords and property managers, the largest concern with renting to military members is that they have a legitimate excuse for breaking a lease – often with very little notice – should they get orders to move elsewhere.
The Servicemembers Civil Relief Act, or SCRA, is intended to ease the financial and legal burdens of service members during active service. It allows military members called up for active duty the ability to terminate property leases without penalty, among many other protections.
Protect your investment
Elizabeth Colegrove, a Navy wife who is also a landlord and real estate investor, writes at her blog, “The Reluctant Landlord” that she proudly rents to military members but has taken measures to protect her investments.
“Renting to military is very rewarding simply because I like taking care of my own. With that being said, and because I am a huge advocate for treating this like a business, I have several tricks to make sure that I, as the landlord, am protected,” she says.
Colegrove suggests not drawing up leases longer than 12 months, particularly not for the first lease. She also suggests avoiding offers of a rental discount or other incentive for tenants who sign longer leases. Some service members sign a longer lease to get the discount even though they might not be able to stay for the full term, she notes.
Colegrove suggests that landlords request military tenants’ orders and ask them to match the length of their orders.
“While I have been told that not every member can provide their orders, I personally have had no issues asking for and being provided orders. I check the orders to make sure that the applicant is not on TDY (temporary duty) or signing a longer lease than their orders date,” Colegrove writes.
She also suggests landlords and property managers do a little legwork of their own, by keeping track of deployment rotations and brushing up on local and state laws regarding the SCRA, she writes.
“Some states, such as Florida, have much more flexible terms than others, like California,” she writes.
Colegrove suggests having a break-lease clause built into the lease anyway. Other tenants may want to break the lease to purchase a house or for other reasons, she says.
Follow the SCRA
Finally, Colegrove suggests following the laws strictly regarding the SCRA.
“The SCRA does provide a proper way to give notice to allow you, the landlord, the most amount of time to fill your property. Follow it exactly and require your tenants to do the same,” she writes. “One of the biggest mistakes I have seen is people being too nice and then losing their shirt.”
Do you have any suggestions for making leases or rental agreements work with the SCRA?