Financial trigger warning! I can’t share my journey without pulling back the curtains and being transparent about my personal finances. To some this may be uncomfortable, but I think it’s an important part of raising the bar. Understanding the relative progress of our peers and sharing financial strategies raises up the entire military community. Not to mention, base pay, basic allowance for housing, basic allowance for subsistence, and any special pay/allowances are all public knowledge and publicly available. My military pay is an open book, but what I’m going to show you are the various tranches for both passive and active income, in addition to net worth information.
If you’re an accountant or a second year MBA student, this trigger warning is for you. I’m going to break my personal finances into two categories: equity and monthly cashflow (net operating income). The monthly cashflow is a mix of pre-tax (rental income), post-tax (salary), and untaxable income (basic allowance for housing). Mixing these doesn’t give the exact operating income per month, but it gives a close, useful number in the same order of magnitude.
Equity – Net Worth (DEC 21)
| Asset Category | Equity (Asset Value – Liability) |
|---|---|
| Rental 1 | $550,000 |
| Rental 2 | $44,000 |
| Rental 3 | $220,000 |
| Primary | $250,000 |
| Retirement | $260,000 |
| Stocks/Cash | $310,000 |
| Crypto | $15,500 |
| Total | $1.65M |
Monthly Cashflow – Including Rental NOI (DEC 21)
| Passive/Active Income Stream | Monthly Cashflow (Revenue – Expenses) |
|---|---|
| Rental 1 | $1,863 |
| Rental 2 | $846 |
| Rental 3 | $717 |
| Salary/Wages | $9,700 |
| Total | $13,126 |
As of now, we have only invested in single family residential (SFR) investment properties. The net effect of investing in rental properties is an additional 35% increase in take-home pay per month (in addition to military pay), without including the monthly principal paydown for rental properties or dividend income from stocks. The salary portion in the above example accounts for any wage expenses (post federal income tax and social security), but includes non-taxable wages (basic allowance for housing); it does not account for personal monthly expenses, as those will vary widely across individuals, and setting those aside allows for a baseline example of available, monthly capital. Taking a look at the numbers illustrates a central theme that I’ve learned so far – investment properties are a powerful financial instrument in your arsenal, and one (of many, I’m sure) critical paths to financial independence in the military. The compounding effects of rental properties on net worth and monthly cashflow cannot be overstated. Additionally, lower interest rates are typically available for VA loans on primary residences with nearly 100% financing. Lastly, a military PCS every 2-3 years uniquely positions us to take advantage of untaxable capital gains on primary residences, assuming you have lived in the property for 2 or more years in a 5-year period.