If you are interested in using a VA loan for investment property, you’ve come to the right place. Most aspects of the VA loan process are pretty straightforward and clear. This topic, however, is a very twisty path full of exceptions, timing, loopholes, strict rules and flexible policy. There aren’t any easy answers, but if you want to use your VA loan benefit for an investment property (or properties), it is possible. Just promise to hang on for the ride.
Investment properties can be a great source of income and a good side gig. If you are acquainted with the benefits of having a VA loan, you know that having the backing of the U.S. Department of Veterans Affairs can be a big boost toward getting an affordable mortgage. There is whole list of benefits, but the Big Three Benefits of a VA loan are:
So if one VA loan is good, then two are better, right? Sort of. Let’s take a look.
Many veterans and military members wonder if they can use their VA home loan benefit to purchase a rental or investment property. The short answer is yes, you can use a VA loan for a rental property, but there are specific guidelines you need to follow.
I’ll explain exactly how VA loans work for rental properties including occupancy and property requirements. I’ll also cover tips for qualifying and using your rental income when applying for a VA investment loan.
VA Loan Occupancy Rules for Rental Properties
The main occupancy rule for VA loans is that you must move into the home within 60 days of closing and occupy the property as your primary residence.
However, the VA does make exceptions if you want to use the loan for a rental property. Here are the main ways VA guidelines allow you to buy a rental with their loan:
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House hacking – You can use a VA loan to buy a multi-unit property with up to 4 units, as long as you live in one of the units. For example, you could buy a duplex or triplex, live in one unit, and rent the others.
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Deployed military – Active duty service members who receive PCS orders can use a VA loan to buy a rental property Someone else (like a spouse) must move into the home while the service member is deployed
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Previous VA loan – If you already used your VA loan benefit, you may be able to rent out that property and use your benefit again to buy another home to live in.
As you can see, there are a few circumstances where you can utilize a VA-backed loan to invest in or purchase a rental property. The key is that the VA views the property as your primary residence, whether you actually live there or not.
VA Loan Property Requirements for Rentals
In addition to occupancy rules, VA rental properties must meet all VA minimum property requirements:
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Property must be move-in ready and meet VA minimum property requirements. Rentals may require extra inspection and appraisal.
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Multi-unit properties must have separate utility shut-offs for each unit.
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Condos must be on the VA approved condo list. Duplexes are exempt.
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Rental income from other units can only be used to qualify if you have a proven track record of managing rental properties.
As long as the property meets VA requirements, you have flexibility on what type of rental you purchase. This includes single family homes, condos, townhomes, duplexes, triplexes, and 4 units.
Tips for Using a VA Loan for a Rental Property
If you’ve decided to use your VA home loan benefit to invest in a rental, here are some tips to make the process go smoothly:
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Shop lenders and look for a VA-specialized lender familiar with rental and investment property loans.
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Be ready to provide documented rental history or property management experience to use rental income to qualify.
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Get pre-approved early so you know the maximum loan amount you can qualify for.
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Focus on homes and multi-units that will cash flow well as rentals. Consider running the numbers with a rental property calculator.
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Be prepared to pay for extra appraisal and inspection fees for a VA rental property.
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If “house hacking”, carefully screen tenant applicants to find responsible renters.
With proper planning and preparation, using a VA loan for a rental property investment is completely doable. Just be sure to find an experienced lender and mortgage officer to guide you through meeting VA rental property guidelines.
Common VA Rental Property Questions
Looking into purchasing a rental or investment property with your VA loan benefit? Here are answers to some of the most common questions on VA rental and occupancy rules:
Can I buy a 5 unit property with a VA loan?
No, the maximum number of units you can purchase with a VA loan is 4 units. Of those 4 units, you must occupy 1 of them.
How soon do I need to move into the rental property?
You must move into the home within 60 days of closing the loan. Active duty service members may be exempt from this rule in some cases.
Can I buy a condo with my VA loan to rent out?
Yes, but the condo must be on the VA approved condo list for your state. Duplexes and other smaller multi-units are exempt from this list.
Can I use rental income to qualify for a VA investment property loan?
Sometimes, if you have a solid history as a landlord. Most lenders require 2 years of rental property management experience to use rental income to qualify.
What if I already used my VA loan – can I buy another home?
In most cases yes. You can reuse your VA benefit to buy another primary residence, provided you qualify with a lender. Some restrictions apply.
Do I have to live in the home a certain length of time?
Technically no, but most lenders require you to sign that you intend to occupy for at least 12 months minimum.
Hopefully this article clarified the guidelines on using a VA home loan for a rental or investment property. While there are hoops to jump through, it can be done! Reach out to both a knowledgeable real estate agent and lender to start the process.
Can You Use the VA Loan for Investment Property? The Short Answer is “No”
But like every short answer, it’s not quite complete. The VA loan program is not designed to allow an eligible veteran or active-duty service member of the military to buy investment properties, but it doesn’t forbid it either if you do it right.
First off, you can have more than one VA loan at a time. Because it is allowed, it opens up the opportunity for you to use a VA loan for investment property. It’s just a matter of timing.
Occupancy is the key. When you get a VA loan, or another one, the loan must be for a home that will be your primary residence. So your current loan must be for your current address, as it were. But if this is a new house and a new residence, then your old house can be used for rental property and therefore income. That’s why timing is key.
The VA doesn’t always require mortgage reserves when you get a loan, but in this case, it does. When you are renting your former home, the VA and your private lender will want you to have cash reserves so that you have enough set aside if you lose your renters. The VA will require you to have three months of principal, interest, tax, and insurance (PITI) set aside in case of vacancy.
VA Entitlement and Math
In a straightforward VA loan guarantee, your entitlement only comes into play if you are buying a property with a significant price tag. But when you are looking to use the VA loan for investment property, and starting to juggle multiple properties and multiple loans, your entitlement comes into play fairly quickly.
The VA Certificate of Eligibility (COE) is the one of the first things you will encounter when you start investigating the VA loan process. The COE is exactly what it sounds like: it verifies to the VA loan processors that you are, in fact, eligible for the program.
The COE, once you get it, also lists your VA benefits entitlement, meaning it lists how much of a loan (or loans) they will insure. For example, if you have the full VA entitlement– $647,000 – your mortgage loan can’t be over that amount to stay under your entitlement. If you are looking to get two VA loans, the two added together can’t exceed your entitlement. In this case, you could have a first VA loan for $300,000 and then a second VA loan for $346,000.
This is a good place to pause and remind ourselves that the VA guarantees the loan but doesn’t actually lend the money. That comes from VA-approved lenders or private mortgage brokers. The VA’s insurance, however, is a very strong card in your hand. It tells the lender that the VA is backing your loan, and lenders take that kind of insurance seriously. They don’t typically like risk, and you are a lot less risky with the VA on your side. For the record, Homes for Heroes is very good at matching you with the right mortgage specialist.
If you hit the upper limit of your entitlement, which is likely with two mortgages and two properties, all is not lost. You will, however, need to make a down payment if you go over. If you go back to our list of the Big Three Benefits, not having to make a down payment for a VA loan is first on the list (for good reason).
You might have heard, or read about, VA loan limits. Some folks say they don’t exist. Others say there are loan limits. It’s confusing. The loan limits most websites talk about are really just the entitlement limits, i.e. what the VA will insure for your loan. In practice, the VA doesn’t limit you to the size of the loan you can get, just the amount it will ensure.
With multiple loans, figuring out and keeping track of your entitlement takes some effort. Restoring your entitlement when you pay off one of your mortgages is an important step that you need to remember. Making sure the VA knows your original VA Loan is paid off will let you use your full entitlement as you pursue more VA guaranteed loans.
Restoring your entitlement means changing your COE, and there’s a two-page tutorial that explains how to do that, as well as a downloadable form that you will need to access.
VA Loan Secrets: What Veterans MUST Know about Using Multiple VA Loans (updated 2023)
FAQ
Can a VA loan be used for investment property?
Can you convert a VA loan to a rental property?
How long do you have to wait to rent a house with a VA loan?
Can you use a VA loan for an apartment?
Can you rent out a house with a VA loan?
As long as the property is your primary residence, how you rent out your rooms is up to you, and you can use a VA loan to fund the purchase of the property. If you plan on going this route, remember to get your mortgage approval early on in the process.
Can you buy a house with a VA loan?
No, a VA loan is intended to finance a primary residence and cannot be used to purchase rental property, investment property, a vacation home, or a second home. When can I rent my house with a VA loan?
Can a VA loan be used for rental income?
In some cases a borrower using a VA loan may be able to use the existing or projected income from the property being purchased to help meet the income requirements a lender has for a borrower. A lender will generally count 75% of a property’s rental income as part of a borrower’s total income.
Can a VA loan be used as an investment property?
But if that’s on your radar, VA borrowers can use their benefit to purchase a home, live in it for a time, and then rent it out as an investment property. While many choose to reside in their purchased homes for extended periods, others see the opportunity for additional income and expanded property ownership.