VA Loan for Investment Property: What You Need to Know

Investing in real estate is a terrific way to create money over time, and a VA loan can assist you in attaining an investment property. If you are an active-duty military veteran or surviving spouse, you may have heard that you may only use your VA benefits to buy a primary house.

While the VA manages how you can spend your VA loan, you can use it to invest in real estate in an array of ways. There are a few drawbacks to using a VA loan for investment property, but it could prove well worth it if you want to build wealth and earn passive income.

So, how can you use a VA loan for investment property? VA loans have a greater occupancy standard than other forms of home loans, but they can still be used for investment properties. This article will provide you with all the information you need to know about using a VA loan for rental property and other real estate ventures.

Can A VA Loan Be Used To Purchase A Rental Home?

VA loans are considered to help current and past military members, as well as their living spouses, in purchasing their primary homes. However, a VA loan can also be used to purchase a rental property as long as the exact criteria are fulfilled.

While there may be some paperwork to complete, the benefits of buying a rental property with a VA loan include no minimum credit score and a 0% down payment when working directly with the Veterans Administration instead of an ordinary lender.

In other words, an experienced person may be able to purchase an investment property with 100% financing, use income from rentals from tenants to cover mortgage and property spending and take advantage of the various tax breaks available to real estate owners.

Types Of VA Home Loans

A VA loan can be used to buy an existing property, build a brand-new residence, make renovations to an existing home, or refinance an existing mortgage. The VA offers two types of loan programs:

VA direct home loan, in which the Veterans Administration serves as the mortgage lender. Borrowers communicate directly with the VA, and loan terms and conditions may be kinder than those given by conventional lenders such as banks, credit unions, or mortgage companies.

The Veterans Administration partially guarantees VA-backed house loans, which can be gained from a business lender. Lenders often view VA loans as less risky, and borrowers are more likely to be granted better loan circumstances, even if they still must meet the lender's income and credit standards. Although being generated by a traditional lender, the Veterans Administration reports that about 90% of all VA-backed loans are made without a down payment.

Who May Apply For A VA Loan?

Applying for a Certificate of Eligibility (COE) to be accessible to a lender is the first step in gaining a VA direct or VA-backed loan. A VA loan for a rental property is available to the following borrower kinds, as stated on the VA website:

• Veteran
• Active-duty military personnel
• Members of the Reserves or National Guard, either active or retired
• Surviving spouse of a Veteran who died on active duty or had a service-connected disability

With A VA Loan, What Kinds Of Rental Property Can Be Bought?

Using a VA loan to buy a rental property can have a lot of advantages for the borrower. When using a VA loan for a rental property, there are a few specific regulations to follow.

Owner-occupied
A portion of the property must be used as a primary residence by the borrower of a VA loan. For instance, a borrower must live in one of the apartments as their primary residence if they are buying a duplex property with two units.

Little Multifamily Home
It is possible to buy low multifamily buildings with two to four units with VA direct and VA-backed financing. The remaining units may be rented, but the borrower would have to live in one as their primary residence. Duplex, triplex, and fourplex are other names for multifamily (or multi-unit) properties, depending on the real estate market.

Limitations On Single-Family Homes
A single-family house that is partially rented abroad can be purchased with a VA loan as a primary residence. A borrower may house hack by, for instance, renting out another bedroom or converting the basement or attic into a studio apartment. VA loans can also help you buy a separate apartment on the same land as a single-family home.

Should A Borrower Relocate, What Would Happen To A VA Loan?

The prospect of being relocated to a different state or outside is a reality for active duty service members. Fortunately, if a VA loan is transferred, borrowers who use it to buy a rental property have several choices.

In conclusion, as long as the borrower uses an area of the property as their primary residence, VA loans can be used to buy rental properties. This makes it possible to buy multifamily residences and utilize house hacking to make money from rentals. Veterans and active-duty individuals have a rare opportunity to build wealth through real estate using VA loans, which provide advantages, including favorable terms and no down payment. Borrowers must, however, prepare for future moves and follow occupancy regulations. Speak with a VA loan specialist to get the most out of this investing approach.