Investment Property Loans for Veterans – A Comprehensive Guide

Department of Veterans Affairs (VA) loans are an attractive mortgage financing option for qualifying home buyers. If you’re an active-duty military member, a veteran or a surviving spouse, you can enjoy lower mortgage rates, limited closing costs and little to no down payment if you meet certain eligibility requirements for a VA loan.

However, if you’re wondering whether you can use a VA loan to purchase an investment property, VA occupancy requirements may present an obstacle. VA loans are stricter than other types of home loans regarding occupancy requirements.

For example, most VA lenders expect borrowers to use the property as their primary residence for at least 12 months after making the investment purchase. That’s, of course, likely easier said than done if you have a primary residence elsewhere and need to stay there.

Even so, it may still be possible to generate rental income or get a return on your investment when you finance with a VA mortgage.

As a veteran, you’ve sacrificed for your country – and you deserve access to programs that can help you in return. One valuable program is VA loans, which can make financing a home more affordable. But did you know that under certain circumstances, VA loans can also be used for investment properties?

In this comprehensive guide, we’ll explain everything you need to know about using VA loans for investment properties as a veteran.

Can You Use a VA Loan for an Investment Property?

The short answer – sometimes! VA loans are intended for veterans to buy a primary residence But there are a couple loopholes that allow you to use VA financing for investment purposes

  • Renting out extra space in your primary residence – If your VA-funded home has a guest house or basement apartment, you can rent that space out to earn rental income As long as you live in the home as your primary residence, the VA is fine with you earning rental income from extra space

  • Buying a 2-4 unit property – Veterans can use VA loans to buy duplexes, triplexes, and 4-plexes, as long as they live in one of the units. For example, you could buy a duplex with a VA loan and live in one unit while renting out the other.

The key is that the property must be your primary residence. You can’t use a VA loan to buy a pure investment property that you don’t live in. But there are creative “house hacking” strategies to turn your primary residence into an income-producing investment.

VA Loan Entitlements

When you get a VA loan, the Department of Veterans Affairs guarantees a portion of the loan amount. This is known as your VA entitlement. Here are some key facts about VA entitlements:

  • Basic entitlement guarantees 25% of the loan, up to $144,000
  • Bonus entitlement can guarantee 25% of any loan amount above $144,000
  • You can reuse your VA entitlement when buying another home
  • Your entitlement gets restored when you pay off your loan
  • There’s also something called a VA funding fee, which ranges from 1.4% to 3.6% of the loan amount

Understanding your entitlements is crucial when pursuing financing for investment properties with a VA loan.

Using a VA Loan for Investment after Already Buying a Home

If you’ve already used your VA loan benefit to buy a home, you may be wondering if you can tap into it again for an investment property. The good news is – you often can!

You have a few options:

  • Pay off your existing VA loan first to restore your full entitlement
  • Buy the investment property as a second home while keeping your first VA loan open
  • Receive PCS (Permanent Change of Station) orders from the military to qualify for two concurrent VA loans

As long as you still meet basic VA eligibility requirements, you can reuse your VA home loan benefit even if you already have an existing VA mortgage open.

Counting Rental Income for VA Loan Qualification

When buying an investment property, you’ll likely want the rent from tenants to cover or offset the mortgage payment. But can you count that rental income when applying for the mortgage?

Unfortunately, most lenders will require you to have a proven track record as a landlord before counting rental income. For example, Veterans United requires:

  • 2 years of experience as a landlord/property manager
  • Verified prior rent collected on the property
  • Signed leases from tenants in place
  • 6 months cash reserves for mortgage payments

Without an established history managing investment properties, counting rental income will be difficult. But an experienced investor with years of landlord experience may be able to leverage rents to qualify.

Using a VA Loan for a Mixed-Use Property

What if you want to live in part of the property but rent out some commercial space? This type of “mixed-use” property is possible with a VA loan if:

  • The commercial space is less than 25% of total square footage
  • There are 2-4 residential units maximum
  • The property has an expected remaining economic life of 30+ years

For example, you could buy a property with a small restaurant on the first floor and an apartment you live in above it. While mixed-use properties are an option, straight commercial buildings don’t qualify for VA loans.

How Loan Limits Affect VA Investment Property Loans

For your first VA loan, loan limits don’t matter – you can borrow whatever you qualify for. But on a second VA loan for an investment property, loan limits come into play if you have a partial entitlement.

In that case, the VA will only guarantee 25% of the county loan limit where the property is located. So make sure to look up the limits for the county where you want to buy an investment property.

Tips for Getting Approved for a VA Investment Property Loan

Getting approved for financing investment properties can be more challenging than a primary residence. Here are some tips:

  • Shop different lenders – some are more flexible than others
  • Boost your credit score as much as possible
  • Lower your debt-to-income ratio by paying down debts
  • Build up your cash reserves – at least 6 months’ worth
  • Document previous landlord experience if possible

The stronger your finances, the better your chances of getting approved for a VA loan on an investment property.

Alternatives if You Don’t Qualify for a VA Investment Property Loan

What if you don’t qualify for a VA loan on an investment property? You may want to consider:

  • Conventional loans with higher down payments
  • Portfolio loans from small banks
  • Hard money loans or private financing options
  • Partnering with other investors to buy property
  • Trying non-traditional rentals like RV parks or storage units

While it may take more creativity and legwork, there are other paths to real estate investing if the VA loan program doesn’t work out. The key is being open-minded and persistent.

Is Buying a VA Investment Property Right for You?

Hopefully this guide gave you a clear overview of using VA loans for investment properties. While not always easy, it is possible under the right circumstances.

Before jumping in, carefully consider:

  • Your savings, income, credit score and debt levels
  • Your experience with real estate investing and property management
  • Current rental demand and trends in your local market
  • The costs and risks involved with rental properties

Investment real estate can be profitable but also stressful at times. Make sure you’re fully prepared for the commitment before borrowing money.

But if you have the resources, knowledge and temperament to tackle investment properties, a VA loan could be the affordable financing solution you need. Do your homework and get educated – and your hard work as a veteran and real estate investor will pay off.

Make Sure You Meet Eligibility Requirements

The first step you’ll need to take before applying for a VA loan is to make sure you meet at least one of the following VA eligibility requirements:

  • Veterans and active-duty service members: You’ll need to have 90 continuous days of service during wartime or 181 days of active service during peacetime.
  • National Guard or Reserves: You’ll need to complete 6 years of service before being honorably discharged or placed on the retired list. Or, you’ll need to serve active duty for a total of 90 days with at least 30 days being consecutive.

If you meet any of the above requirements – or you’re a qualifying surviving spouse who didn’t remarry before turning 57 or before December 16, 2003 – you should be eligible to apply and qualify for your Certificate of Eligibility (COE), which will prove you’re eligible for a VA loan.

Refinance With A VA Streamline Or IRRRL

If you’re still an active-duty service member and have a new permanent assignment that’s a non-commutable distance from your primary residence, you may want to purchase a primary residence in your new location.

But what if you’d like to rent out your existing home instead of selling it to free up your VA entitlements? You can take out a VA Streamline Refinance – also called a VA Interest Rate Reduction Refinance Loan (IRRRL).

Converting your VA mortgage loan to a VA IRRRL will exempt you from the VA occupancy rules requiring you to use your property as your primary residence. You’ll be able to purchase a new primary residence with a fresh VA loan while continuing to finance your current home with a VA Streamline Refinance.

To apply and qualify for a VA IRRRL, you’ll need:

  • 6 consecutive months of mortgage payments on your current property
  • Proof that refinancing will result in an immediate, tangible economic benefit, such as lowering your mortgage rate or switching your home loan from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage

VA Loan Secrets: What Veterans MUST Know about Using Multiple VA Loans (updated 2023)


Can VA loans be used for investment property?

Keep in mind that if you use a VA loan to purchase an investment property, you must treat that property as your primary residence. You can rent out a bedroom or even a guest house, but you’ll need to live there to meet VA guidelines.

Are VA loans available for investors who are veterans?

If you’re an active-duty military member, a veteran or a surviving spouse, you can enjoy lower mortgage rates, limited closing costs and little to no down payment if you meet certain eligibility requirements for a VA loan.

Can I buy a 4 plex with a VA loan?

Can you buy a multifamily property with a VA loan? The good news is you can buy a duplex, a triplex or a four-plex using your VA home loan benefits. However, the property purchased cannot be used solely for investment or rental purposes, and one unit must be your primary residence.

What property Cannot be financed with a VA loan?

You can’t purchase or build a vacation home or a purely investment property with a VA loan. New construction is possible, but veterans can’t simply purchase a plot of land with the intent to build a home some day. You also can’t use this as a business loan. Again, the focus is on primary residences.

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