How to Achieve Financial Independence in the Military

Summary

BiggerPockets Money Podcast: How to Achieve Financial Independence in the Military

Released on July 22, 2025

Hosts: Mindy Jensen & Scott Trench
Guest: David Perret, Retired Marine Corps Soldier & Founder of From Military to Millionaire

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Introduction: Financial Independence for Military Personnel

In this insightful episode of the BiggerPockets Money Podcast, hosts Mindy Jensen and Scott Trench delve into the unique financial opportunities available to those serving in the military. With the special advantages that military life offers—from zero-cost healthcare to housing allowances—this episode is a must-listen for active service members or those considering enlisting. Their guest, David Perret, a retired Marine Corps soldier turned real estate investor, brings firsthand experience to the table, discussing how he built a multimillion-dollar portfolio while serving full-time.

Three Financial Paths for Soldiers

Scott initiates the discussion by outlining three potential financial outcomes for soldiers after an eight-year service commitment:

1. Completely Broke or Cash Flow Negative:
   Many soldiers might end up with no savings, high credit card debt, and minimal investments. Scott emphasizes, “We're going to avoid this outcome entirely with today's presentation.”

2. Middle Class Trap:
   Soldiers could accumulate some wealth, perhaps owning a home with a mortgage and having moderate debts. However, this path doesn’t align with the FIRE (Financial Independence, Retire Early) movement's goals. Scott remarks, “You will be able to retire if you pursue this over the next 30, 40 years,” but it's not the ultimate freedom many seek.

3. Financial Freedom - "The World as Your Oyster":
   The ideal path involves building several hundred thousand dollars in wealth, living rent and mortgage-free, owning a paid-off vehicle, and having no personal debt. The bulk of their wealth resides outside the Thrift Savings Plan (TSP), generating passive income. David supports this vision, stating at [05:50], "we can probably even push that number depending on, you know, how many times we use the VA loan."

Understanding Military Finances

Scott presents a detailed analysis of a soldier's financial journey, especially in the initial three years:

• Income Levels:
  • E1 (<4 months): ~$23,000
  • E1 (>4 months): ~$25,000
  • E2: ~$28,000
  • E3: ~$29,000

David clarifies that many soldiers are promoted from E1 to E2 within six months, enhancing their income trajectory. He shares, “[...] I got promoted to E2 right after boot camp."

• Living on Base:
  Soldiers often live on base, reducing or eliminating housing and food expenses. Scott models expenses at around $44,000 annually, allowing for significant savings—upwards of $31,000 per year.

The Power of House Hacking

One of the standout strategies discussed is house hacking—using the VA loan to purchase multi-bedroom properties near military installations and renting out rooms to cover mortgage payments. Scott illustrates this with an example near Fort Bragg, NC:

• Property Investment:
  • Purchase Price: $157,000
  • Renting Rooms: $1,200/month
  • Annual Savings: Potentially $192,000 over eight years without accounting for investment returns.

David emphasizes the benefits, “the VA loan being a zero down mortgage allows you to get into a property at an earlier age than you would be able to.”

Investment Strategies: Beyond the TSP

While the Thrift Savings Plan (TSP) is a valuable tool, Scott advocates for investing outside of it to maximize early financial growth:

• Index Funds and Real Estate:

  • Investing $200,000 in index funds at a 10% annual return could grow to approximately $210,000.
  • Serial House Hacking:
    Utilizing multiple VA loans to purchase properties across various bases can exponentially increase wealth. David shares success stories, noting, “I have friends who've done exactly that as E4E5s.”

• Live-In Flips:
  Purchasing a property, living in it for two years, and then selling it tax-free through the Section 121 exemption (extended to 10 years for military personnel) can yield substantial capital gains.

Advantages of Military Life for Financial Independence

David and Scott highlight several advantages that military personnel have over their civilian counterparts:

• Zero Cost Healthcare and Education:
  “If you choose to get a college education, can get one for free or for very cheap,” David points out.

• VA Loans:
  Zero down mortgages provide a significant leverage point for real estate investments.

• Job Security:
  “You're guaranteed that job for that timeline,” ensuring consistent income and the ability to plan long-term investments.

• Debt Reduction Programs:
  The Service Member Civil Relief Act lowers interest rates on debts, which soldiers can utilize to eliminate personal debt faster.

Challenges and Considerations

Despite the numerous advantages, the military state presents disadvantages:

• Fixed Income and Limited Scaling:
  Soldiers may find it challenging to scale their income to elite levels compared to other careers. Scott mentions, “you will never be in the top 1% in your age bracket.”

• Limited Side Hustles:
  The demanding nature of military life can restrict additional income opportunities outside official duties.

• Lifestyle Restrictions:
  Housing locations are often determined by duty assignments, limiting personal choices.

• Service Obligations:
  Commitments range typically between two to five years, impacting long-term financial strategies.

Real-Life Insights from David Perret

David shares his personal experiences, emphasizing practicality and discipline in financial planning:

• Vehicle Choices:
  “The car is the fastest and slipperiest slope, I think, for young service members because they want the high interest Mustang,” he jokes, highlighting the temptation to splurge on depreciating assets.

• Real Estate Success Stories:
  David discusses friends who have successfully utilized VA loans multiple times, building substantial real estate portfolios while serving.

• Savings Programs:
  Insights into the savings deposit program offering a 10% yield for deployed service members, encouraging them to take advantage of such opportunities while in service.

Strategies for Officers vs. Enlisted Soldiers

While this episode primarily focuses on enlisted soldiers, Scott briefly touches on strategies for officers, who generally enjoy higher starting pay and different financial trajectories. Officers can begin house hacking earlier and leverage their elite income for more substantial investments, further accelerating their path to financial independence.

Final Takeaways and Parting Thoughts

The conversation concludes with actionable strategies:

• Drastically Reduce Expenses:
  Cut down on housing, transportation, and discretionary spending to maximize savings.

• Invest Aggressively:
  Utilize VA loans for real estate, invest in index funds, and explore creative investment opportunities.

• Build a Liquidity Position:
  Accumulate cash to maintain flexibility and seize investment opportunities as they arise.

• Continuous Learning and Networking:
  Engage with financial communities, read extensively on personal finance and real estate, and network with like-minded individuals to sustain and grow wealth.

David affirms, “I think that this person who set up for that after eight years has a very good shot at getting to that millionaire mark.”

Notable Quotes

• David Perret (01:35):
  “I was enlisted and I didn't technically get to retirement. I got to a financial point where I was able to just walk at 13 years.”

• Scott Trench (05:50):
  “the soldier is very likely to reenlist or to go along with a very similar career trajectory following that service commitment if they're building wealth like this because it will feel like there's not a lot of cash in their life and they'll run out after a few months.”

• David Perret (05:50):
  “One of the reasons that I love the house hack so much is that 33% of the average American's income goes to housing.”

• Scott Trench (09:39):
  “this soldier being house hackers could potentially live for free or for very cheap near these bases.”

Conclusion

This episode of the BiggerPockets Money Podcast offers a comprehensive roadmap for military personnel seeking financial independence. By leveraging unique military benefits, adopting disciplined saving and investment strategies, and embracing real estate opportunities like house hacking, soldiers can set themselves on a path to substantial wealth accumulation. David Perret's real-world insights underscore the feasibility of these strategies, inspiring listeners to take actionable steps toward achieving their financial goals while serving their country.

For more resources and detailed financial models discussed in this episode, listeners are encouraged to visit BiggerPocketsMoney.com/Military.

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Disclaimer: The strategies discussed in this podcast are based on the hosts' and guest's experiences and research. Listeners should consult with financial advisors to tailor plans to their personal circumstances.

Transcript

[Mindy Jensen]

Today's episode is about options. You have to fast track fire while you're in the military. If you're not in the military, this episode might not be for you. However, if you know somebody who is active in the military or thinking about enlisting, please send this episode to them. We'll be breaking down how unique military advantages, from zero cost health care to housing allowances can actually get you to financial independence. Hello, hello, hello and welcome to the BiggerPockets Money Podcast. My name is Mindy Jensen and with me as always is my in line co host Scott Trench.

[Scott Trench]

Thanks Mindy. There's Leanfire, there's Barista Fi, there's Chubby Fi, there's Fatfi. But today we're going to be talking about Semper Fi. How's that? We are so excited to have David Perret on today once again. David is a retired Marine Corps soldier turned real estate investor and is the founder of From Military to Millionaire. Go check that out if you are interested in finances in the military. David built a multimillion dollar portfolio while serving full time and now teaches other service members how to achieve financial independence through real estate. David, thank you so much for coming on the BiggerPockets Money podcast today and assisting me. I am no expert on the intricacies and the details and the realities and the challenges that are specific to soldiers life. This is a hypothesis, a potential plan for consideration for enlisted soldiers and we are so delighted to have you helping poke holes in it, corroborate or agree with me whenever I happen to accidentally be right in my approach here. David, welcome to Biggerpockets Money.

[David Perret]

Thank you Scott for having me. I should probably clarify for whoever wrote your notes. I was enlisted and I didn't technically get to retirement. I got to a financial point where I was able to just walk at 13 years. But that being said, I did 15 years if you count the reserves and I know a thing or two about the military.

[Scott Trench]

Thank you for coming on today. And just to preface this, this is a presentation I've prepared. I am very passionate about the armed services and trying to help the soldiers and fire community move toward financial independence. I have given some talks at military academies, actually twice at the US Naval Academy talking about how the students there, the midshipmen, can go on during their careers and emerge from their five year post graduation service commitment with as much wealth and optionality as possible. And so today I've taken that presentation and I have repurposed it for an enlisted soldier. And the idea is how far along this journey to financial independence. Can we get this enlisted soldier looking at the math? I did a lot of work to research pay allowances, the freedom or lack thereof in the initial stages of that journey, and how to play the hand that is dealt to an enlisted soldier to maximize wealth creation by the end of an eight year active duty service commitment, which would be on the high end or longer term for most soldiers. So how's that sound, David? You ready to beat up my presentation? Mindy, will you do the same?

[David Perret]

Let's rock it.

[Mindy Jensen]

I will.

[Scott Trench]

Awesome. All right, with that, I'll bring it up here. All right, this is an all out approach to early financial freedom. Soldiers edition. We're going to talk about the three choices, three outcomes that I think a soldier can have after an eight year service commitment, the three paths they can take. We're going to talk about the math of the soldiers game, the rules of their game. We're going to talk about their financial baselines, how to house, hack and live for free. Following your promotion to E4, we're going to get started with some investing thought starters and I'm going to give you some parting thoughts on what I think is achievable over an eight year service commitment. And David, of course is here to keep me sane and grounded in whether that is actually realistic because I am not a soldier. Of course I've studied financial freedom. This is my attempt to apply it to the soldier's life. All right, so we have a choice here in what we can achieve over these eight years in the army, in the Marine Corps, in the navy, or in the Air Force or Coast Guard, whatever branch you're in. The first option, which I think sadly too many soldiers end up taking, is to be completely broke or cash flow negative. They emerge from this stint with no savings. They're renting their house, they lease or own a fancy car, Perhaps a jacked F250 pickup truck. There's a large amount of credit card debt, there's not much invested in the tsp and there's a large personal debt. We're going to avoid this, this outcome entirely with today's presentation. The second one is what we have taken to calling the middle class trap here on BiggerPockets Money. Where there is some wealth, we have net worth, we've accumulated and we've maybe even done some things right along this journey. We have a little bit of emergency fund. We've bought our house and have a mortgage payment. We've got a car with a payment. It's not a $35,000 jacked up trip pickup truck, but it's still an expensive car with, with, with that big payment that comes out of the paycheck every month. We've got moderate credit card debt, we've got moderate personal debt, and we do have a balance in our tsp. Most of that wealth is going to be in our home equity in our tsp. And this is not a problem per se. You will be able to retire if you pursue this over the next 30, 40 years. But it's not the ultimate all out approach to financial freedom that I like to go for. In terms of the fire movement and I think what what folks are looking for from this video, again, the of this is going to be fairly limited. The soldier is very likely to reenlist or to go along with a very similar career trajectory following that service commitment if they're building wealth like this because it will feel like there's not a lot of cash in their life and they'll run out after a few months. And then the third option is to have the world as your oyster. This is where we have several hundred thousand dollars in wealth built up, a significant cash position in what I call financial Runway. Maybe a year or two of spending in cash ready to go. We are living rent and mortgage free, we drive a paid off car, we have no credit or personal debt and most of our wealth is outside of the tsp, generating income that we feel comfortable spending. So this is the outcome that we're going to be looking for today. David, how am I doing so far? Do you believe that these are a reasonable approximation of what is possible or likely and that most soldiers end up in these two camps?

[David Perret]

Yeah, I'd say so. And I say the world is your oyster. We can probably even push that number depending on, you know, how many times we use the VA loan. But we can talk through that as we go.

[Scott Trench]

Absolutely.

[Mindy Jensen]

Okay, so before we get any further, Scott, I can see somebody watching this presentation who this presentation is made for their military. They don't really have a lot of financial education coming into this presentation saying, well, how am I going to get this 250,000? Clearly I have to be an officer or I have to be in the military for a long time. I have to be making a lot of money in order to have that. What is the base salary we're talking about here? Are these options for everybody?

[Scott Trench]

I'm so glad you asked, Mindy. This presentation will go through a very detailed analysis of the base salary, the basic pay for these recruits and the allowances that they're given like allowance for housing and for subsistence and we'll talk about those and how those move through. So we got three paths, right? So you want to end up in the first outcome here with no options. Then you know, spend like a sailor, right? Buy your dream car, get a sick pad, yolo, double down on that yolo, party it up, live paycheck to paycheck, never invest. And this is the last time you think about personal finances in your life for the next several years. That's how you end up broke. If you want to end up middle class or in this, on this path to that middle class trap, then you'll buy liabilities that you think are assets, like that reasonable car, like that nice home, like putting all the rest of the money into the TSP and we'll just spend a little bit less than we earn, build a little bit of a savings buffer and autopilot our wealth accumulation. We'll self educate a little bit, we'll read enough to be dangerous, but we won't really take it from there. And again that's fine if we just move people from category one to category two with this presentation. I'll be delighted. But again, if you're interested in the fire movement, then you're going to need to be all out. This is going to be in a little bit of an obsession here. We're going to spend as little as possible and we're going to invest aggressively. We're going to drastically cut transportation expenses by buying a beater or not owning a car at all. We're going to hack our housing and learn how to live for free while we pocket all of our BAH or the vast majority of it. We're going to tightly control our day to day spending, build a huge liquidity position. Again, invest primarily at first out of the outside of the tsp. Although in later years I would be totally comfortable beginning to max out the TSP probably around year three or four. We're going to concentrate our investments. We're not going to diversify because we're trying to build a large wealth position in the early days and we're going to obsess. This is not going to be the last time we're going to think about personal finance. We're going to read books and really think about this for a long period of time following this presentation. And I think that folks like this can have the option to live life on their terms or become financially free within five to 10 years, beating David's time of 13 here to frame this, we're Going to talk about the shockingly simple math behind early retirement. How does one retire? Well, there's a very simple way to describe this concept. This is review for anybody who's familiar with the fire movement or the early retirement movement. But the time it takes you to retire is a function of one number, beautifully illustrated by a blogger called Mr. Money Mustache in a blog post called the Shockingly Simple Math behind Early Retirement. And that number is your savings rate as a percentage of your take home pay. So if you're like most people and you save 10% of your take home pay, it will take you about 51 years to retire, assuming you invest at about a 7% inflation adjusted return. If you can up that number to 20%, you shave 14 years off your retirement journey. As you save more and more of your income, that number geometrically shrinks. Right. If we can save 50% of your income, you're going to retire in 17 years instead of 51 years for the 10% saver. So the reason for this is that the less you spend, the more cash you accumulate and the less your portfolio needs to generate for you to be able to retire. So this is the game we're trying to play here is how much income can we produce? How little can we spend? How can we invest it to attempt to have the option to retire as early as possible?

[David Perret]

One of the reasons that I love the house hack so much is that 33% of the average American's income goes to housing. And if you can eliminate that, then you just cut your retirement time based on that chart in half. And the VA loan being a zero down mortgage allows you to get into a property at an earlier age than you would be able to having to save 5, 10, 15, 20% down for a property. So that's why like when I talk about this stuff, I'm like, this is the biggest lever that you have as a service member.

[Scott Trench]

All right, with that, let's take our first promotion. After we hear from our show sponsors, I'll be walking you through steps that you can take today towards that.

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[Scott Trench]

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[David Perret]

Your favorite band's merch. You can Venmo this or their next.

[Mindy Jensen]

Show, you can Venmo that.

[David Perret]

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[Scott Trench]

Used everywhere MasterCard is accepted.

[David Perret]

Venmo purchase restrictions apply.

[Mindy Jensen]

Welcome back to the show.

[Scott Trench]

Real estate's such a powerful alignment. Spoiler alert for servicemen because there's different rules that service members have to play by than the rest of the population and those rules have advantages and disadvantages which I'm going to attempt to list here and get your feedback on. David I think that the advantages for service members is that they're going to start with zero in the most case or have the ability to start with zero, right? Most college educated peers will start with student loan debt and these folks will either not need to get a degree or if they choose to get a college education, can get one for free or for very cheap if they so choose. After tax, income potential is actually pretty high. And let's put that in context here, right? A soldier saying well I'm making like $25,000 a year. How can you call that high? Well, let's remember here that the average recruit is 19 years old. Right. And we're going to talk about, I'll show you a chart later on this. What the night. What the average 21 year old makes in this country, the average and median and top 1% specifically makes. These soldiers are not making below that average in basic pay. And we've got housing and food taken care of either with allowances or in most cases for these new recruits by living on base and eating and living for free and not pocketing those allowances. So I actually think that there's a really strong income potential here for a soldier relative to the others in their age bracket in this country. And then there's awesome benefits and perks which David touched on here, which include special incentive pays, thrift savings plan, great life insurance, free health care, tax benefits, low cost loans, specifically the VA loan which we'll talk about here, and the savings deposit program which offers 10% yield.

[David Perret]

It's so popular to be like, oh, we're victims. We pay our military like slave labor. And I'm like, you guys don't understand. Like medical, dental, health insurance, life insurance, food, housing covered, none of that is in your taxable base pay. Unless you buy a car or take on debt. Your base pay is your net leftover spending cash. You don't need to touch a dollar of it to live. You've got housing covered, you've got food covered, whether you're in the barracks eating at the chow hall or you get the bah, move off base and get a 380 or whatever it is, monthly food allowance, like it's covered. And then all this other stuff plus, and you kind of mentioned this, but if you had debt prior to joining the military, the Service Member Civil Relief act cuts that debt to 6 and lowers your interest rate on all your debt the day you join. I always joke with people, I'm like, when you join the military, you start at basic like freedom, where every dollar you make, you could do anything you want with it. It has nowhere it needs to go. And then you screw it up by buying liabilities and things on credit because you're an idiot and we all do it. But if you could avoid that trap, $20,000 a year after taxes, that you can just invest at 18, you know, or 40 is pretty powerful.

[Scott Trench]

Let's talk about the disadvantages for a second. See, if you grew at these. The first is that you can't scale income. You will never be in the top 1% in your age bracket. If you are a military service member, you'll never Be in the top 5%. You probably won't even make the top 10. Or you might crest the top 25%. We'll talk on that a little bit later. But you will never be in this elite income category. You'll know your income, it'll be fairly fixed and the opportunities to outpace that are there. But even those are limited relative to other career contexts. Second, there's a limited ability to side hustle. Very few people are like David here and can really start a profitable, thriving, getting side business during their time in the military. It's you can earn additional income while you're in the military, but these will be likely for most hourly gigs outside of their time when they're on duty. The next is going to be lifestyle freedom. You cannot choose where you live as a military service member. Typically you're going to be assigned to a duty station as you progress in your service and perform well. I do believe you get preference in selecting where you want to serve, but that's not guaranteed. And this is not something I can assume in a model. For example, in this process, this presentation. And then of course there's a service obligation. Service contract can range from two years to five years. I've done an eight year contract here, which I think is becoming more common as we see more and more folks signing up. There's actually more and more recruits joining the military this year in particular, it seems like.

[David Perret]

Yeah. So I would say on this, yeah, the best you can do for scaling income is there are some special duties that get a little bit extra pay, but it's nothing crazy. So the best thing you can do is get promoted. I tell people that all the time, I'm like, dude, instead of like going out and side hustling, like, focus a little bit of effort on making sure you're maximized for promotion points. Because if you get promoted faster, that's an extra couple hundred bucks a month without an extra amount of time. When I went to my job school, they were like, you got three choices, overseas, east coast, west coast, put them in order, 1, 2, 3, and we're going to tell you which one you got. And then if you don't like the one you got, we're going to be like, well, you chose it. It might have been your third choice, but it was your choice. Now granted, I got the choice I wanted, which is overseas and I ended up in Japan, but. And then yeah, it kind of depends. Eight years, probably more. More the officer commitment, but it does depend on your job. And there are things that fluctuate your main bread and butter is probably that four or five year contract, but there are some options in there. And the one thing that I was going to say. Oh, I actually think the service obligation in a way is a benefit because unless you get a DUI or like murder someone and like do something that gets you kicked out, you know, drugs or whatever, you're guaranteed that job for that timeline, which means you can afford to take some risks because you know that there's job security no matter what the market's doing and you know what you're going to make and you know that it's only going to get better as long as you keep your nose clean. So it could be, could be seen as a, a double edge.

[Scott Trench]

I'll also call out the life threatening risk that is inherent in military service here, which is not discussed in the financial model, but is a major issue and by the way, something that I am very grateful for and proud to pay taxes to support for all of these service members. I'm glad, as we get into it, I hope you'll agree with me that there is robust compensation opportunities for folks over lengthy service commitments and that is well earned.

[David Perret]

Yeah. And if you, if you do, you know, get, get blown up or shot or whatever, like your family gets a half a million dollars, so that helps set them up. I don't know that that's a bonus, but it's a nice morbid way to say it.

[Mindy Jensen]

Not a bonus.

[David Perret]

It's a good compensation package.

[Mindy Jensen]

It's a good compensation package, but I bet everybody would rather have the person than the 500k.

[David Perret]

Allow me my morbid vet humor humanity. Allow. Allow me to have it. Can't take that away.

[Scott Trench]

I also made three other assumptions here because I needed some assumptions in order to model this out in Excel and make a fancy spreadsheet. I assumed that our soldier does not receive BAH or bas and lives on base and sleeps there for the most part. I assumed an eight year active duty stint here. The commitment may be different, but I've assumed that there will be a eight year active duty requirement here and there will not be any reserves as part of that. And I've assumed that the soldier cannot choose where to live and will live at the largest military installations in the country during this time period.

[David Perret]

Sounds good.

[Scott Trench]

Zelia says with three questions. How much will you earn over the service commitment? How much of that can you keep and how well can you invest the amount. Amount that you keep? So over the first three years a recruit's going to earn and I've broken this out into two separate buckets. The first three years where the recruit is age 19 to 22 and is required to live on base or may be required to live on base. May not. May not be eligible for an exception there. And there are four income brackets here. There's E1 with less than four months. There's E1 with more than four months. There's E2, and there's E3 pay during this period. These are abbreviations for different levels of tenure in the military for those who are not in the military who are trying to follow along today. And this is, I think, a relatively below average scenario in terms of income because there's never any side income assumed in this at all. And there's no special or hazard pay for these recruits during this entire three year stint. Right. Remember, this is four income levels over three years. Most E1s, my understanding is get promoted to E2 in the first few months. Months.

[David Perret]

I think it's right at six months. Yeah.

[Scott Trench]

E1 less than four months. E1 more than four months. Then I think E2 is a promotion at six months. Is that right?

[David Perret]

Yeah, yeah. I can't remember if it's six months from the day you graduate boot camp or six months from the day you went to boot camp. I think it's six months from the day you went to boot camp. And the other thing here, which is gonna not. I'm gonna not throw off your whole thing. We're gonna stick with your assumptions. But there are a very large majority. Well, I don't know if it's a majority, but a very significant percentage of people who join contracted as an E2, E3, and sometimes even E4, depending on your branch. For example, I was an eagle Scout before the military, so I joined and I got. You get E1 pay under four months at boot camp. That's what that is. And then the day I graduated boot camp, I got promoted to E2. And then it was like six months or a year later that I got E3. I was an E5 at three years and two months. And I was a fast track. But. But there's a significant amount of people who join as E2, E3 the day after boot camp and would actually make more than this in that first three years, which is cool.

[Scott Trench]

All these numbers are sourced directly from the military Pay's website, which makes financial modeling very fun because I don't have to guess at any of these inputs. Like I exactly how much money these people are going to make in the first year depending on their year of the second year, depending on the year of service here, it's very, very easy. Militarypay.defense.gov is that URL. And just to read these numbers off for folks listening here, this is a great one to watch on YouTube because I did prepare this presentation. But they're about $23,000. For our E1 who just recruited after the first four months, that bumps up to 25,000. For an E2 that jumps to 28,000. For an E3 that jumps to 29,000. These allowance numbers are kind of misleading on this slide because for the majority perhaps of these E1 through E3 recruits, they will be required to live on base and then they will receive these allowances and pay them right back for housing. So they won't actually see these dollars come into their life for the most part, but they also won't shell out dollars for housing or in some cases for food or for a bulk of their food during this time period. This is very simple for my perspective for the first three years for our recruit who's not like David and is not on a fast track here, and they're just going to progress through these ranks on a pretty average standpoint. And they're low income and low expenses. I modeled this out and I, and I, and I said, here's the average American one person household, right? This is not a average American household spending. This is average American household spending for one person households. And this is from a year ago. Okay? This person is spending about $46,000 per year across a large number of buckets including housing, transportation, food, alcohol, personal insurance and pensions, healthcare, entertainment, apparel and services, education, and then a miscellaneous bucket. But our E1 through E3 does not pay for housing. So this $18,222 that the average one person household spends on housing goes to zero. The smart soldier who is making $23,000 per year does not buy a $35,000 pickup truck in this time period. So if this person simply buys a Corolla, for example, I found a Corolla that is less than an hour from Fort Bragg, formerly Fort Liberty. And this is for 5500 bucks. This will do just fine for our 19 year old recruit for probably the duration of their service here. It's got 162,000 miles on it and will require minimal maintenance. There is no need to spend more than this over that over the course of those eight years. And I think we can drastically cut this transportation expense from $6,300 a year to $3,000 a year and be. And be very comfortable.

[Mindy Jensen]

I have a question for David. Do you even need a vehicle when you're on a base?

[David Perret]

No.

[Mindy Jensen]

So you could have $0 in transportation if you wanted to.

[David Perret]

I will say it depends on the installation, but for the first four years that I served, especially in Japan, but then in Japan and in San Diego, at both duty stations, I was walking distance for everything. And they try to build it out to where like within a five to ten minute walk at both installations. For my first three and a half years I served was gym, chow hall, medical, my unit, my barracks, all of it, pool. And so I did not have a car for the first two years. And then when I went to San Diego, I blew all my deployment money on a Harley that I didn't need, but I didn't need the Harley. I just wrote it on weekends for fun. And honestly, yeah, you could Uber or mooch rides with friends and, and you could absolutely get rid of that completely. But it's also depending on the base. Like Bragg is huge. So unless you want to be stuck at, you know, a little tiny hub and never leave, you're going to want some kind of ride or a friend to mooch off.

[Scott Trench]

I thought about doing it one way where, oh, you could put all these to zero or very close to it. But I want this soldier to live a reasonable life during this period. Right. And that Corolla will get them around during this. Not in particular style, but be able to do all the things that they really want to do. I believe on the budget that I've constructed here, that's my hope. Based on your feedback, David, it sounds like you could go much lower than this. And obviously these would look different if you're deployed over 60. So next I have food. I have a nice picture of the chow hall here, the DFAC dining facilities, I believe that's the short for here. And the food budget, I believe in theory I could put it zero for this person, but I believe that despite not receiving bas, this person will want some variety from the chow hall during their time here. So I gave them a budget of about $200 a month to eat off site. And this is for a single person. That seems like a pretty reasonable budget here considering that the bulk of their food will be paid for by the chow hall. How am I doing here?

[David Perret]

I'd say you're spot on. Yeah, people will inevitably, at least on weekends, go out and eat great.

[Scott Trench]

$422 in alcohol, $1,000 for personal insurance and pensions. Soldiers don't have to pay for pensions and they have very cheap insurance options. So you will not be spending anywhere close to a one person household's dollar outlay on insurance and Pennsylvania pensions here, correct?

[David Perret]

Yeah, I'd argue it's probably like half of that.

[D]

Perfect.

[Scott Trench]

So we could even go lower. I have a conservative estimate here. Soldiers don't pay for health care. So the $4,000 that a single person might pay for health insurance and health care on a given year or potentially more is going to go to zero for our soldier. Soldiers don't pay for education, so the 824 bucks that the average American pays for education is going to go to zero for the soldier. There's a lot of free resources, I believe for soldiers and if they choose to begin getting college credits and degrees, they can do that with spare time for free or for the bulk of it paid for for free.

[David Perret]

Yeah. Tuition assistance will cover you for. I have a friend who got his doctorate all the way through on tuition assistance and then still had his GI bill for when he got out.

[Scott Trench]

Well, I believe that one of the things that soldiers and I have in common is a love for beer. Beer makes me happy and is an important part of life. And I know Our soldier is 19 and would never drink, of course, but I have decided to reallocate some of this budget to reflect shared values here. And I've increased this very uncomfortably low $422 alcohol budget per year to $3,000 per year. That's a large number of cases of natural light for our soldier here once they turn 21, of course, although I've modeled that as if they were going to drink at 19, I don't know why. So I put that into the model here for this. And I've also said that this soldier deserves to live a little bit. So I've increased our entertainment budget. I've nearly doubled it for the average one person household to $4,000 a year to let them live a little bit. So how's this, David? Is this, is this a fair budget?

[David Perret]

I think that's reasonable. I mean that's 300 bucks a month, give or take for. Or I guess if you count both, it's probably 600 bucks a month. Right?

[Scott Trench]

So yeah, this allows this soldier to live from a fun perspective better than the average one person household by a considerable amount. Once we exclude the housing and transportation.

[David Perret]

Which is good because we do be partying. And I saw the. Your apparel, there's actually a clothing allowance. So like it would be for like personal clothes. Sure. But like your, your military uniforms are every year on the year anniversary, you get a clothing allowance that's supposed to be enough to, you know, replace your main items and cover whatever. Now it's probably not quite that, but it's like 6 to 800 bucks that you get. So you could theoretically erase that outside of like civilian stuff. So I think that's a good low number. Yeah.

[Scott Trench]

Awesome. So this all totals to about $18,000 in spending once we've bumped up our alcohol and entertainment budgets, not counting some of the other savings opportunities that we briefly discussed here in my model. And I believe that I have zeroed out the allowances here in my model because they're not going to go to our soldier, they're just going to go straight on through back to the military for the housing and food there. But I've said this soldier over three years. This is supposed to read E2. This does reflect the E2 pair. But this says the soldiers in year one, E1 and E2, year two is in E2 and year three is in E3 are going to get this level of income about $90,000 in aggregate. And their expenses with pretty good lifestyle, I believe relative to the average American, at least in terms of their ability to spend on the fun things in life are going to be about, what is it, $44,000. And that's going to enable them to save after tax, $31,000 in cold hard cash. That assumes no tax advantage, retirement, nothing in the tsp. This is just cash that could accumulate in our soldiers bank account account. Is that realistic, David?

[David Perret]

I think so, yes. And it's also not like you've already pointed out, it's not accounting for any special duty pay, a deployment that results in a tax exempt combat pay status for a period of time. Like in my first, when I E3, E4 for me, I was in Afghanistan for seven months. Tax exempt pay plus hazard pay plus whatever. So. And then on top of this, one thing that we haven't even mentioned on this is all of this is assuming that this person also chose a job that had had no bonuses. And there are like, if you go like the nuke program in the Navy, that's like a 50k bonus that you're gonna get the day you graduate MLS school. Now it's taxed, but I mean even still, that's a chunk, you know, I know guys E2, E3 who have 50, $75,000 set aside depending on that. So like they're, we are like just for those listening like this is the like absolute bare minimum of like income potential.

[Scott Trench]

I'm learning all these different things. And again, I'm not an expert on the intricacies and nuances of all these programs. You are. That's why I'm glad to have you on on on today telling me about these things. This is the, the base case that I've modeled after a good amount of research. But it's just nothing replaces actually living and breathing this stuff for years. And I'm sure it's front and center for folks like you that entire time really doing this stuff. So I appreciate you saving me from any embarrassing misses here like and these other opportunities that I don't know about. All right, so this person's gonna save 31,000 and they're set up to start actually earning pretty serious coins in the next couple of years following this, this promotion to E4. Right. So at E4, the pay bumps pretty dramatically. I think it's about $24,000 difference in terms of this number. 34,000 to the number that they're going to collect between their annual basic pay and all of their allowances, which I pay about $58,000 here. And that's only going to continue to climb as they go out there with their service commitment. I have them getting promoted to E5 in year six and then being staying at E5 through the end of their.

[David Perret]

Eight year commitment, which again, very conservative because I was E6 at year I think seven or eight and I was in one of the slowest promoting jobs in the Marine Corps.

[Mindy Jensen]

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[D]

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[Mindy Jensen]

We're dropping our daughter off at college for the first time and we'll be there a couple of days before she moves in. We chose to stay in an Airbnb over a hotel because we really want the flexibility that an actual home offers. We love having a kitchen available to cook in, not just that tiny refrigerator. We also really like that everyone has their own bedroom. You know. That got me to thinking about hosting our own home on Airbnb the next time we're away so someone else could feel the same in our home. And now it's easier than ever with Airbnb because with their awesome new co host network, you can hire a local co host to help you take care of your guest. They do the work for you and you could earn a little extra money. Co hosts can create your listing, manage reservations, provide on site support and message guests. It definitely could be a great opportunity for you. Find a co [e-mail] host.

[David Perret]

On WhatsApp. No one can see or hear your personal messages. Whether it's a voice call message or sending a password to WhatsApp, it's all just this. So whether you're sharing the streaming password in the family chat or trading those late night voice messages, that could basically become a Podcast your personal messages. Stay between you, your friends and your family. No one else, not even us. WhatsApp message privately with everyone. The McDonald's snack wrap is back. You brought it back.

[Scott Trench]

Ranch snack wrap.

[David Perret]

Spicy snack wrap. You broke the Internet for a snack snack? Ranch cap is back.

[Scott Trench]

All right, let's cash back in. So let's review where I'm at so far. Soldiers earn very little during the first three years. We have little. We're going to put that in context a little bit. But their expenses are also super low. Everything that you could think of almost is going to be, is going to be covered or could be covered by a smart soldier during that first three year period. Most recruits are between 18 and 24 years old, with the average being about 19 first three years of military service. I'm really thinking of as a college alternative to some degree. Their peers are in college during that period of time. The same people in that same age bracket, many cases are in college racking up debt and or not earning income, certainly not income close to what the soldier is able to earn and then keep. Because of this dynamic, we have a very simple strategy. There's not really a need for this complex layer of it. It's just, just keep expenses low and don't blow our pay. That's it. That's the whole goal for the first three years. And this E3 to E4 transition is a critical milestone with a huge bump in pay and allowances, a huge increase in the amount of cash coming into this recruit's life. But it also comes more importantly, perhaps with freedom to live off base, resulting in the option to again receive those allowances. All this correct, David?

[David Perret]

Yes, sir.

[Scott Trench]

All right. I also want to call out this concept of earning very little in context here. So our median 21 year old old in America is earning 20 grand a year. Our average is earning 25,000 and the top 10% are earning 46,000. Our age 19, E1 recruit is earning 25. This is not counting the allowances. Right? If we count the allowances, this number is much higher. But they're not seeing this, they're not feeling this, hitting their paycheck or bank account. So I've excluded it for the purpose of this discussion. That progresses this way until their age 21 year. Our recruit, when they're age 22 and get promoted to E4, they're going to be earning $58,000 per year. Year, which includes your BAs and BH, which puts them well above the average, well above the median, and a little bit shy of this top 10%, which, you know, per the discussion point earlier, this is not an elite level of income, but it is a serious compensation amount compared to the average or median person of that same age bracket. And this progresses nicely through age 26 where they continue to be above this level level. We spent this time setting the stage for years one through three, right? Years one through three. There's nothing really to do here except get promoted to David's point. Do what you got to do, keep your expenses super low, or even put a reasonably high ceiling for these entertainment and alcohol budgets or whatever the fun stuff is, but make sure you keep the rest of the expenses low and are actually accumulating cash. And I think a great target for this is at least $30,000 by the time you hit E4 with little to no personal debt. If you can do that, I think you've set the stage for this next phase of the journey, which I think is where we can really begin to start moving toward financial freedom in years four through eight. And this is where we're going to see expanding income, especially in the sense that cash is coming into your life with the allowances. You should see your cash position expanding pretty rapidly. You should see your freedom and flexibility increasing with choices like where you live and what you drive and what you eat eat playing a bigger part in this. And you're going to have that optionality to get ahead. I want to introduce this concept though, because as you receive the allowances for housing and food, you are then actually responsible for paying for your housing and your food. So we have to add these expenses back into our model here in order to get an accurate picture. Right? That brings our spending total pretty substantially up here to this much higher number from a spending perspective. So we have to figure out how we can address that housing situation. And so I found. This is where I wanted to introduce the concept of house hacking. Right? A soldier who is house hacking could potentially live for free or for very cheap near these bases. There's a steady stream of very qualified tenants, by definition, near these large military installations. And so I went to the very biggest one, Fort Bragg in North Carolina, formerly Fort Liberty, and I found a. A home for sale. This is a three bedroom, two bath home just a few miles away from the base that is for sale as of last week. When I put this together and I looked it up and I saw that rooms rent for 600 to 900 in the area. This is not the nicest house, it is one of the cheaper ones, frankly. So I'm Assuming that this will rent for 600 a room for two roommates, I assume that you get a 6.4% VA loan which was the then current interest rate as of last week. And I assume that you have the following expense allocation allocations for maintenance, personal utilities, vacancy allowance and CAPEX allocation. And if we are getting two roommates at $1,200 a month in rent and we can reduce our cash cost of living to a ridiculously low number, we may even be able to live for free if we're doing a lot of this maintenance and capex work ourselves. How am I doing here, David?

[David Perret]

You're doing great. This is an easy base hit.

[Scott Trench]

Awesome. So I did more Excel modeling and put this into a How would this impact our soldier over 10 years, this single decision. Right.

[David Perret]

And I just do this real quick because you are going to have a significant chunk of people who get on this webinar and they're like housing so expensive. I live in San Diego as succinctly as possible. I will tell you that you, if you go with like a duplex or fourplex, you can use 75% of the rent that's coming in to qualify for the mortgage and you can qualify to a point. My Buddy bought a $1.2 million fourplex in San Diego county as a single E5. So I just want to throw that out there that the numbers scale for expensive markets because you're going to have a whole bunch of. It's not possible in my market market and that's wrong.

[Mindy Jensen]

As a real estate agent, I'm going to jump in and say if you don't believe David, even though he's right, you should reach out to a lender in your area and start talking to them, asking them questions about the loan process and get a really good lender who works with the VA program all the time. I don't live in an area that we have a lot of VA loans. There's a lot of misinformation about the VA loan. Get a lender who works with this product product all the time, not just somebody who says they can do it. I will say that I have an amazing VA lender that I would love to recommend to you. It is illegal for the lenders to kick any money back to me to recommend them. I just want to prevent you from having a horrible experience.

[Scott Trench]

And I'm sure David from Militarytomillionaire.com also has some great lenders as well. Is that right?

[Mindy Jensen]

Where do you think I got my lender?

[David Perret]

I was going to Say, I'm pretty sure that both of you have done a refi or loan through a lender that I introduced you to at one point or another.

[Scott Trench]

And this is another thing like this. There, there are financial communities out there for military. There's a, like we are not the only people who nerd out about finance and not the only people who have attempted to help out military members with this. There are communities that are dedicated to this with true experts. You should definitely go seek those out. From military to millionaire. David's community is one of those. We are just friends. We don't have any financial affiliation with from military to millionaire.

[David Perret]

Just let me know where to send the check.

[Scott Trench]

I put together a very simple model here as well for housing. And I said, you know, I assume that hey, this person could ren a place and spend 1200 bucks a month on rent, which I think would be very common for someone stationed near Fort Bragg, for example, getting that 16,000 or so in Bah, they could buy a place like that house and get no help from roommates. They would qualify without any rent coming in. Or they could house hack and you can see the drastic difference in cash coming out of their lives if they're a house hacker, renter, home owner. By the way, I assumed a $7,200 cash outlay in my model per year and that's what I'll put in later in the deck, which is more conservative interpretation of the numbers on this previous slide just in case those are for folks that are wondering. And then the net worth impact is also very substantial because the house hacker is actually building wealth because that cash coming in from the renters plus the loan amortization plus the appreciation of the property is actually helping them turn their housing situation into a net worth creating hater for them, which is not usually the case in housing. Whether you rent or buy, you're usually spending money on housing. It's an expense that comes out of your life. You're just losing less wealth as a homeowner over very long periods of time in many cases. So a house hacker can live ridiculously cheaply. I put the housing cost here at $7,000 a year instead of $18,000 a year. And that brings us to, if we just stop here, we say this new person, they're going to spend the full, by the way, average food budgets. This assumes that your food budget is going to be consistent with the average American's household spending for a one person household. So I did not touch that number here. I moved it back up to the average number because that will come back into your life when you move off base. But if we stop here, you're going to accumulate $192,000. $192,000. Not 195, $192,226 over an eight year service commitment, but without investing anything that assumes a 0% return. And you'll also have a rental property, one rental property, this first house hack, which you've probably moved out of as you've moved to different locations at that point, but you'll have this one house hack that has built $41,000 in equity. Does this seem achievable, David, still?

[David Perret]

Absolutely.

[Scott Trench]

So how well can we invest that nearly $200,000? Well, if we stick our cash in an index fund and earn 10% a year, not using any tax advantaged accounts, that bumps that number to about $210,000 in wealth that can be generated. Generated, which is a nice bump, but I think we can do a little better on that. What if we serial house tact. And to your, to your point, I went to the three largest military installations in the country. This one is outside of Fort Bragg, right? This one is going to be Fort Campbell. This is a triplex for sale. This is a duplex in Killeen, near Fort Cavazos. Did I pronounce that right?

[David Perret]

Who knows, they keep changing names.

[Scott Trench]

And then this One is near McChord Air Force Base near Seattle, Washington. This is actually a duplex for 480 in Tacoma, Tacoma, Washington. So these would not be the nicest properties in these areas. But they seem to the surface to me to be serious candidates for further investigation for a house hacker. So I think this is possible in all those. I did not do San Diego because it was not one of the top three largest ones. I'm sure there are a lot of folks stationed in San Diego. That's a harder market. And I think that one of the things you can do if you're serious about this is cash accumulation is the game, right? How much of this, the more this number piles up over your years, the more options you're going to have with respect to being able to take over a mortgage, bring some cash, bump that, bump that down, fix things up, or otherwise find advantages or opportunities in the area that you're going to be deployed.

[David Perret]

Well, and this also assumes that, like you said, serial house hacking, like there's a very good chance that this person could be at, you know, three, three to four duty stations in eight years, if not more, and they could use the VA Loan two to three times, maybe more depending on. And they wouldn't even need to use it after that. You do it twice and then you could, you could go conventional. But I mean depending on remaining entitlement and we're not going to get overly complex in this, but just looking right there, if you bought the Campbell one and then the Killeen one and then you moved to Washington, I can tell you based on county loan limits that you could buy all three of those zero down because the Washington county loan limit is probably a million dollars by the time you got there, you'd still have enough entitlement to buy all three at each PCs studio station.

[Scott Trench]

Remember this, this recruit is $30,000. So we they could put down 5% on this property and use an FHA or low down payment conventional loan. On these first two, let's say they got stationed at Fort Campbell, then for Cavazos for a year or two each and then they bought this one and in year five or six they're stationed in San Diego. Well now we can use the VA loan and we've got all this income from our rentals that we can add to our basic pay in bah and bah that helps us qualify for that $1.2 million property. That's how that compounds pretty nicely for this person. You might even want to save the VA loan depending on what your strategy looks like and how long term you're thinking. And just put down a low down payment conventional for example on this because you have that cash.

[David Perret]

So I did. On this house.

[Scott Trench]

We haven't talked about assuming a mortgage, but we're starting to get into more of a buyer's market. This is a rare in practice, but in some markets that are deep buyers markets you may find that you can assume assume a loan. VA loans are assumable. They come at the opportunity cost of the person you are assuming the mortgage from from using another VA loan on the future or using that amount of their VA loan towards that next credit.

[David Perret]

If it is a veteran buying the house, they can take over the entitlement from the original owner and then that person can restore their entitlement and use it again. It's not a has to, but it is a can. If it is a non veteran assuming a VA loan which is possible, possible, then the veteran would lose their entitlement.

[Scott Trench]

Awesome. So even better, and I think that you'll find during your time in the military that you will be looking at properties near bases that you're stationed at or duty stations that you're stationed at that that there will be sellers who have VA loans and you may be the highest bidder. That price, that 3% mortgage that is assumable may allow you to pay more for that property, making you a very compelling buyer. There is a lot of paperwork that goes along with this. It takes a while to do so. It's a little bit rarer in practice than I had hoped for a few years ago. But this is an option available to folks. And if you're serious about it, you may find opportunities here and there during your time in service. You'll also need to potentially have a lot of cash because let's say that the VA loan on a property is 300 grand and you're buying it for 350. Somebody's going to come up with that 50 grand. So that's why it's so important to save your pennies early in this journey so that these options emerge for you in years four, five and six. All right. We also have a live in flip. This is Mindy's favorite strategy. You could do the exact same. Let's say we take that property and forget renting it out. This first house hack, I said the $157,000 place near Fort Bragg and you put some money into it, fix it up, make it nice. Well, if you live in that for two years, you can sell it and pocket the capital gain tax free. If you don't live in it for two years, you could potentially rent it out for much higher rental. Maybe those room prices go from 600 to 900 bucks a month in rent rent. So this is a very powerful play to put in place as well, in combination with a house hack or two.

[Mindy Jensen]

I have a question for David. Does this two year limit apply to service members when they're being transferred to another base?

[David Perret]

Okay, so the intent to occupy is a whole thing and people try to. Gurus try to teach around it, but it's reasonably assumed to be one year as far as the VA goes. But if you get orders to, to PCs or to move or whatever or like something that changes your situation, then you can move out of the house, no problem.

[Mindy Jensen]

Oh, I meant the tax part.

[David Perret]

Oh, that's. See, that's what I was raising my hand about. This is one of the coolest things ever. So the Section 121 exemption, which everybody knows, or at least some know, is like the day that you sell the house if you had lived in it for 24 cumulative months prior to that sale within the last five years. So two out of the last five years you lived in the house, you're exempt from up to 250 if you're single, half a million if you're married. The military gets a 10 year extension. So if you bought the house active duty and you sell it within three years of leaving service, you just had to occupy it for two of the last 15. And so my buddy for example, bought a house in 2014, moved out of it in like 2017, sold it in 2022, would not have met the two out of the last five netted $517,000 in capital gains because this was in San Diego county, in, in north park, if you're familiar. And because he was active duty, he got to write off the full half a million and paid capital gains tax on $17,000. Pretty rad.

[Mindy Jensen]

Yes, that is a strategy that I have used. I'm going to give you one more bit of updates. Natalie Kilati told me that it's $250,000 per person on title that is capital gains exempt. So if you have, let's say an 18 year old daughter who has been living in the house and you put her on title as well, now you've got $750,000 in tax free capital gates.

[Scott Trench]

I also want to call out something here on this, this live in flip and house hack concept like San Diego people poo poo San Diego, right. And you know it's too expensive, I can never possibly afford it there. But if again if you're able to figure out ways to qualify for that, for example by having several house hacks and some income, the appreciation in markets like San Diego can be very powerful and there's some, some rules that are very interesting. So for example, let's say that I'm a Navy submerged earner, right. And I'm going to be out for many months on tour here and I buy a property in San Diego. Well, San Diego has got, you got to have a license in order to do short term rentals, for example. But think about that, is there, is there an opportunity there for sailor in San Diego who's going to be out for months in a row to buy a house, have it be a short term rental because it's their primary residence, right. And they're, they're able to get a preferred status on these licensing, they're able to rent it out as a tier 2 or tier 3 short term rental and they're going to have very limited competition in whatever area that is for short term rentals because the area typically prohibits them except to owner occupants are There opportunities like that in some of these more expensive markets that are there for the creative and prepared soldier.

[David Perret]

I would say yes. I actually my last two years in the Marine Corps I was stationed in Oceanside North North San Diego County. I ended up renting just because of where the market was at the time. And I ren rented a four bedroom three bath house and I got the, the landlord to agree that I could sublet bedrooms and so I had two bedrooms on Airbnb out of my house even while I was in it and I paid, I think it was 3,000amonth in rent and like 2,500 of that I got back through Airbnb. It was great. I say Airbnb. And then my buddy John was also a, he hates if I use the word tenant. So we will not use, we will not call him a tenant. He was a paying roommate. But I loved, I love that guy. That was fun. That was good times.

[Scott Trench]

That's I think where this, this creative aspect here you have the concept of the house hack. You have the concept of live in flip rent by the room, renting out portions of a duplex, short term rental. These are all variations on this theme. And depending on where you are stationed, you may find that there are oddball or creative rules that allow for immense profits, especially for the owner occupant. Go looking for those where you are stationed and that may make the price palatable. Right? And by the way, you don't have enough money to buy a place in San Diego. Well, I'll tell you what, let's not use me personally, but let's say you want to buy a place in one of these more expensive markets and you're in E4. Right. And you spent the last four years accumulating $65,000 in cash when most people are broke and you read a bunch of real estate books and are active in that community and you want to buy an 850,000 to $900,000 duplex in San Diego county, make part of it a short term rental and the other half a true long term rental for that because you're taking advantage of that owner occupancy exemption for the half that is a short term rental. Guess what? You're going to have good odds of raising money. You know who's not going to be able to get financing for that is hopeless. The dude who's broke as an E4 at that same point in time, right. There's a story behind accumulating $65,000 dollars as an enlisted soldier over a four or five year period that is very compelling, I think for the right private investors if you go seeking them and make this a part of your journey.

[David Perret]

I'm not going to name drop, but I've got friends who've done exactly that as E4E5s.

[Scott Trench]

That's someone to bet on, right? Some discipline was in this person's life for years to prepare them to put that down there. And they need another 60 to 100 grand to do that. I bet you they have reasonable odds of getting that. So some parting thoughts here. Right. I believe that the theme here is to set yourself up for this several hundred thousand dollars outcome. After an eight year service commitment, you really got to drastically cut your expenses like housing, transportation and your day to day items there. Spend only on what you value. You need to build this huge liquidity position because it's going to expand your optionality, especially in areas like real estate as you have more and more cash. I want to invest primarily outside of the TSP because again, again, taxes are just not a major factor on this journey for our enlisted soldier in the first eight years. So there's not really this major tax advantage from investing in the tsp. And I believe that the house hack and live in flip is going to be far more powerful from an optionality standpoint. But again, after we crest this kind of $50,000 mark, I would not be opposed to investing in the tsp. It's just, it's not a big difference in these first couple years. It makes a much bigger difference over longer time periods. And I would recommend the TSP for someone who is less aggressive taking that middle path. Just some caveats there. We're going to concentrate and buy a handful of large, aggressive, carefully researched investments perhaps in real estate and we're going to obsess. This is not going to be a one off thing. I'm going to buy some real estate in three years. I'm going to read a bunch of books on real estate. I'm going to join these local networking groups each place in that I'm stationed, maybe a couple of online ones as well and really immerse myself in this world of finance. And I believe you can substantially crush this $250,000 net worth number over this eight year service commitment that we've created here in a pretty substantial portfolio. Might look like hundreds of thousands of dollars in wealth saved. Hundreds of thousands of dollars in real estate equity, plenty of Runway, all that kind of good stuff. How am I doing with this so far? David?

[David Perret]

No, I agree with your assessment.

[Scott Trench]

Let's also briefly touch on officers. I know about 18% of service members are officers. I have a whole separate one for officers that is different from this. But I want to call out that officers earn elite pay across the country. They complain about it and don't realize this, but graduates of the US Naval Academy in particular, they earn the fourth most on a early career and mid career scale out of all universities in the United States of America. It's an incredible amount of money that these folks are making. This is from two years ago. This has only gone up since then. I couldn't find the most recent data set, but this is an incredible amount of amount. West Point's up there as well. And I don't think that Air Force Academy is too far behind here. Outside the top 10. This day one after graduation pay is like 48,000 bucks plus another 34,000 in allowances for a total of 87,000 day one after graduation pay for these officers and that bumps up to like $122,000 in just two years following that and their promotion to 02.

[David Perret]

And they can house hack right away.

[Scott Trench]

And they can house hack right away way. But I will call out that while they get this free college, this elite education, they also don't earn meaningfully for four years. I thought about modeling out the hundred dollar stipend or whatever they get every month as year ones and 400. But I was like screw that. I'm going to put them as zeros for the first little bit here if you want me to. If you want to model that out, you can take the spreadsheet and put that in for yourself. But I believe that it is entirely possible for enlisted soldiers to generate more wealth over their eight year commitment than the first eight years. From a first E to year four of service for an officer in the.

[David Perret]

Military, it's all going to depend on the person. But the opportunities are there for sure.

[Scott Trench]

But I will call out that the officer, once we get past year three or four or so is going to start to run away with it. That's where the income really begins to get incredible. And an officer that's really intentional about it will start to see that compound super meaningfully before we even get to house hacking and that kind of stuff here. And hundreds of thousands of dollars a while wealth after five years, if they keep their expenses very low and are very intentional about this and I believe misspoke, this does include a model which includes a few house hacks during this officer's journey by the way. And that's all she wrote.

[David Perret]

I love it. One thing I just wanted to touch on real quick, just this is total random sidebar. But I think like investing near military installations, especially these huge ones where like you know, Fort Bragg is not going anywhere, creates a nice spot where people are super worried about a recession. But like if the vast majority of that market's income comes from a military installation that is going to stay there, it creates a much softer landing point for a market turn because the driving force of revenue is people whose pay isn't going to change and they aren't going to get laid off, which is great and allows you to create that buying opportunity on the downswing. And then simultaneously people are always worried about tenants by and large being a military person. Your tenant pool of military people pool is going to be a better tenant pool than none. And that's not because civilians are nasty and service members are great. That's because 90 plus percent of service members have a security clearance. They've passed background checks, they've got guaranteed job. Like they, they fit the mold for who you would want on a basic criteria unless they just screw up their credit. And if they totally screw up as a tenant, every landlord I know asks for their commands info and can call their boss and be like yo, your dude just like destroyed my house for no reason.

[Scott Trench]

Reason.

[David Perret]

Not that that's necessarily. I don't know if that's ethical. Depends on how you work through it. But like it's an option and most kids or app, you know, whatever are going to behave decently because they don't want the reputation of trash in somebody's house.

[Scott Trench]

There's all these other qualitative items here and I am sure that there's. There is exactly what you just said. There may be also a risk if there's a bunch of new construction going in one of these areas that could, that could cause prices or events to go down with it, you know, so there's more work to be done for people that are interested in this. But I think the opportunity is, is fully there for service members, enlisted or officers to really come out with an immense head start compared to their median or average counterparts that are not in service. One of the huge advantages is this ability to just model everything. You just know exactly what's going to happen so you can plan around that and make your decisions and bets in the context of those rules. Whereas I think other folks can get ahead from an income perspective in a way that service members take. But it's going to be less predictable in some ways. And they're going to have to play by a different set of rules. So absolutely, someone who goes and crushes it outside the service can get ahead. They can pace far ahead of a service member in terms of wealth if they go all out. But man, this is a good opportunity if you just don't blow it for a lot of service members.

[Mindy Jensen]

Scott, I have a couple of questions, one for you and then two for David. Up at the very beginning you had the cash flow neutral screen where it said these people are buying liabilities that they think are assets. I would just like you to clarify what that means. I know what you mean, but I'm not your target market for this presentation.

[Scott Trench]

Classic example of this is the house, right? This is straight from rich dad, poor dad. I really appreciate his take on this concept. Right. The house, for example, if you buy a standard house and do not rent it out is going to take money out of your life every month, right? You're going to pay the mortgage bill, you're going to pay the utilities, the insurance, you're going to pay the taxes, you're going to pay the for maintenance and you have to repair major systems every, you know, decade or so around the house. That's taking money out of your life. People consider a house an asset on their balance sheet and it is technically an asset, but it's not an asset in the sense that it's putting money into your life. When we're talking about acquiring financial assets here, right? A car is similarly not an asset. The less you spend on your car, the richer you're going to be. The less you spend on housing, the richer you're going to be over time. We want to acquire assets that put money into our pockets. A rental property, property for example, as an asset if you buy it right and make the right assumptions here because it should generate more income from rent than the costs to maintain the property inclusive of that mortgage and the maintenance. It should appreciate in value and you should amortize that loan over time and that puts money into your pocket. So same thing with stocks or bonds or other traditional investments.

[David Perret]

I agree with all of the above and I would just like to say for anyone who decides to follow me on social media after watching this, I do did sacrifice on the vehicle front for like a long time. So don't judge me for the brand new Corvette Z06 I'm driving. I earned it.

[Scott Trench]

That's the thing is I this is just the beginning of this journey, right? I didn't like the model is a tail.

[David Perret]

I know, I know I just, someone's gonna get over there, be like, this guy was just telling me to buy a Corolla and he's in a.

[Scott Trench]

But that's it. I drove a Corolla. I was in the military, but I drove a Corolla for many years.

[David Perret]

I had a 1988 Volvo 740 Turbo that fell apart on me.

[Scott Trench]

You do that until the wealth begins to compound past that several hundred thousand dollar mark. Right. Once you get to this 250, $350,000 mark that I think a lot of people can get to in their time in service, you know, then the investments begin to compound. If you keep at it and you're going to look up one day, maybe in your 30s, maybe your early 30s, this enlisted soldier, and you'll be like, I'm a millionaire now and guess what? That asset base can buy your fancy schmancy car or your fleet that David now has, I believe that are pretty fancy. Fancy. And, and you drive it. And that's, that's the point.

[David Perret]

Prior to a year and a half ago, the most I'd ever paid on a car was 12, 9. And that was a, you know, I don't think I'd ever bought a car that was newer than six years. And that 12, nine bought me a, a diesel Jetta station wagon that looked like a mom mobile, got 40 miles a gallon and I drove 140,000 miles on it in three years. So, yeah, yeah, I agree 100%. The car is the fastest and slipperiest slope, I think, for young service members because they want the high interest Mustang.

[Scott Trench]

Yeah. And by the way, like this, this is an asset base in a business that you've built because of this foundation that you poured. It sounds very similar to what I described here. Different types of journeys, maybe even some mistakes that slowed that journey unnecessarily. Then I call up this guy David, and I say, can you go over this presentation real quick before we air it? And he says, sure. Picks up. He's in fricking Barcelona, just ram with the bull, several cocktails deep, and he's flying back the next day to his house in Missouri with his fleet of fancy cars purchased from the asset base that has been built up over this time. This is the start. And then of course it's going to take another 5, 10 years to compound it into millions. This is just the beginning of that journey. But I believe that this person who set up for that after eight years has a very good shot at getting to that millionaire mark. The opportunities and options expand so geometrically from that point that it's impossible to model out. You know, I could just drag it across, but it's impossible to model out exactly where those options will take you at that point or.

[David Perret]

Mindy, you said you had two for me.

[Mindy Jensen]

I have two for you. You mentioned something about the savings deposit program that has a 10% yield.

[David Perret]

Yeah, this is a, it's just a savings account that is, it's offered when you're deployed. So it is a 10% guaranteed backed by the government savings program that is for anybody who's deployed. You can put, I think you can put up to ten grand in it. And the entire time you're deployed and until you pull it out, it earns, earns 10%. And you can, you can put it in as a direct deposit from your bank or you can, you can front load it by like writing a check up to, up to whatever your base pay amount is until you've got 10 grand or whatever.

[Mindy Jensen]

So you could put $10,000 in there while that's only for being deployed.

[David Perret]

Oh, it is tax exempt.

[Mindy Jensen]

Tax exempt. When I come back from deployment, if I don't pull that money out, is it still earning 10% or is that only during my deployment?

[David Perret]

Don't quote me, but I believe so. I can't remember how long I left.

[Mindy Jensen]

It in there because I would never ever take that out. I'll take the $10,000 at 10%.

[David Perret]

Yeah. I can't remember if you have a time limit on that or not. I yanked it right away to go buy a Harley.

[Mindy Jensen]

Okay. So if you have a, if you're a service member and you have this option, take advantage of it and then let me know if you have to pull it out after you come back.

[Scott Trench]

But the Harley was less than 7,600.

[David Perret]

Yeah, the Harley, the Harley was great. The Harley, I put 11,000 miles on that in four and a half year, three and a half years. And you know, it was not a great financial decision, but it was a great life experience decision. And realistically, owning the Harley was less than most cars people buy and the gas was cheaper. And in California. And if I was an entrepreneur, here would be my justification. In California you can lane splits, you don't have traffic, which means you save an average of 30 to an hour every commute. Time equals money. But I wasn't an entrepreneur at the time, so it just meant more time to drink beer. But you know.

[Mindy Jensen]

And then the second one is the service member program to reduce debt where it goes down to 6% s c.

[David Perret]

R a service member Civil Relief Act.

[Mindy Jensen]

Okay. Is that automatic or do you have to apply?

[David Perret]

No, I mean you have to notify them. But it's federal. It's a federal act. Yeah. Or debt that you had prior to service. Now, a lot of installations or banks will actually honor it on debt, even after the fact. In fact, there are some things. I don't know if this is still going on, but for a little while, you could apply for a personal loan through Amex and then the day you got the loan, you could send them your scra stage stuff even if you were already in the service and they would just waive your interest on it and you'd have, you know, interest free, whatever for a little bit. I don't think they're doing that anymore. But there were, there were like, there's like a couple installations that will still work with you even after the fact. But the, the act basically says any debt you had prior. And I don't actually know if it includes mortgages, but credit card, auto loan, all of that stuff for sure just cut to 6% flat the day you join.

[Mindy Jensen]

Okay. So yeah, if you are listening to this episode and this is something, oh, I do have some debt. You, it's not going to be automatic. You have to let them know. But let them, oh, so now you're not paying so much interest and then bust out those debts.

[David Perret]

Yeah. Then take all the interest you would have been paying and put it into the paying it down.

[Mindy Jensen]

Yeah. Because I could see somebody listening to this and saying, oh, okay, so now they're going to change it for me. Right. You have to do the work.

[David Perret]

Yeah, you got to go apply.

[Mindy Jensen]

All right, David, this was awesome. Scott, thank you so much for sharing all of this information with our listeners who are either military or have military members in their life. I hope they learned something new and I would love feedback from you about what you learned or you know how great this presentation was. [e-mail] [e-mail] and David, what's your email?

[David Perret]

Go to the best podcast guest.com and it has my contact info, all my social media.

[Scott Trench]

I'll make it even simpler. We're going to create a new [e-mail] Military and this will have all the resources we discussed today. It will have our presentation links to where you can find out more about David and all the great resources at from military to millionaire and other other sources there. It'll have the presentation like I said it'll have the Excel spreadsheet with the quick math. I have it for both officers enlisted and you can download all that right there and get a link to the the episode here. I'll make a few corrections based on our conversation today as well before uploading.

[David Perret]

I love it. Thanks for having me on, guys.

[Mindy Jensen]

All right, that wraps up this episode of the Bigger Pockets Money podcast. He is David Perret from Military to he is Scott Trench from Bigger Pockets Money. I am Mindy Jensen saying Semper Fi. Semper by Goodbye, Semper Fi.