The VA Loan is an incredible benefit for veterans and service members. With no down payment and low-interest rates, it presents a unique opportunity. One of the common questions that we get at ADPI is whether or not you can use the VA Loan to purchase an investment property. The answer – if you’re looking to buy a property just to rent out – is “no”. Using a VA Loan requires that the borrower intends to occupy the residence as a primary home. But, there are other possible ways to use the VA Loan to purchase a cash-flowing investment property.
Although the VA Loan can’t be used immediately as a rental property or a fix-and-flip, it can still be an investment. Not to mention that you could live for free. To clarify, the VA allows VA loans as an option to purchase residences that have up to 4 units. The key here is that you must occupy one of the units and rent out the three remaining units. By doing this, you may be able to bring in enough income to come close to-or completely cover- your mortgage payment. A lot of real estate investors now call this “house hacking”.
You may be wondering if you can count potential rental income on a multi-unit to qualify for a VA loan. It is possible, but lenders may require 1 or 2 years of experience as a landlord to count it. Keep this in mind when you’re running your numbers on potential properties.
The VA does not require a certain amount of time to occupy the home as a primary residence – but specific lenders do. Most lenders require a certification that the borrower's intention is for the property to be a primary residence for at least one year. After that year, if you receive orders, a new job offer, need to up-size or down-size due to family situation, etc, you could choose to rent out the property and purchase another home with a second VA Loan.
In January 2020, the VA removed the loan limits for borrowers using a “first-tier VA Loan." This means that as long as you are eligible and can qualify for the loan--there is no limit on how much can be spent on the property. Though this is fantastic, the “no limit” rule does not apply to 2nd VA loans – any loans after the first tier are subject to the VA’s county loan limits. You’ll also need to check with your chosen lender or the VA Regional office to see how much eligibility you have left for a 2nd loan.
If you find that you don’t have leftover eligibility, you do have the option to do a “one-time restoration of benefit” by refinancing to a different type of loan. By say, refinancing to a conventional loan, this frees up your entitlement and allows you to use that entitlement for another VA Loan purchase.
If you’re interested in learning more about using the VA Loan as an investment opportunity, ADPI has multiple ways to help you! We have a fantastic growing network of real estate agents that can assist you in choosing and identifying your potential purchases.
When considering using your VA Loan, it’s important to consult with professionals. ADPI Financial is here to help you with your VA Loan purchase. We have brokers and loan officers in dozens of states, and we are continuing to grow every day! Let us work hard to earn your business and get you started in your real estate investment journey!