The Two Ways You Can Use a VA Loan for Investment Property

Homes in a suburban neighborhood.

There are many ways to purchase an investment property. You could use loans designed specifically for investors, or you could, if you have the funds, purchase the property outright.

But there is one strategy that often gets overlooked: VA loans.

While not meant for investments, VA loans can be used for this type of purchase, and you may find that these loans are perfect for your overall investment strategy.

Getting a VA Loan for Investment Properties: A Real Strategy

The Common Issue: VA Loan Occupancy Rules

VA loans are designed to help veterans purchase a home. Homeownership is considered one of the main pillars for financial stability and prosperity, so supporting these loans for veterans is one of the many duties for the Department of Veterans Affairs. But to secure a VA loan, you have to live in the property for a certain period; in other words, it is supposed to be your primary residence, at least for a specific time.

However, there are exceptions to this rule, and just because you are required to live on the property does not mean it can’t become (either right away or after a short period) an investment property that earns money.

With that in mind, there are basically two ways for turning a home purchased with a VA loan into an investment property.

1. Converting Your Single-Family Residence into a Rental

The first strategy we will highlight is simply purchasing a property, living in the property for a certain period, and then moving out and placing the property into the rental market.

The first step, of course, is to buy a house using a VA loan. You don’t have to hide the fact that you intend to place it as a rental, but you will need to discuss the terms of the loan to see how long you are required to live on the property. At this phase, it’s important to think and act like an investor, even though the property will, for a certain time, be your personal residence. Look for properties in high-demand areas, including properties near parks and other neighborhood attractions. Also, research comparable rental rates so you know how much you’ll earn.

The next step is to live on the property. This is usually about a year or two, depending on the specifics of your loan. During this time, you can make changes that improve the property, but don’t “over personalize,” as you want the property to be attractive to all sorts of renters.

After a certain period, you can place the property as a rental. You’ll still have the VA loan on the property, but once your time period is up, you can move out and make it an income-generating asset.

2. Purchasing a Multiunit Property

The other option for using a VA loan for investment property is to buy a multiunit house. With VA loans, and many other government-backed loans, you can buy a property that has up to four units, giving you the chance to not only purchase a property for yourself, but to purchase a property that will bring an income.

If you use this strategy, you are not free from the occupancy requirements; you still have to live on the property for a certain period. But (and here’s the important part) you only need to occupy one unit.

Suppose you were to purchase a duplex. On one side, you can live on the property and make it your home; on the other side you could have a renter who is paying you a monthly income. After a certain period, you can move out and turn the entire property into an income-generating investment.

There are rules for these properties that come from both the VA and the individual lender. First is the occupancy rules which we have discussed. You will also be limited to properties that have four units or less; if it has five units, the purchase is off limits and you’ll likely need a commercial loan. The VA also has specific details for the nature of the property. For example, all units must be accessible without passing through other units, and the property must be primarily zoned for residential occupation. The utilities need to be separate, but certain facilities like laundry can be shared.

While the rules can be extensive, using VA loans for a multiunit property is a great way to invest in your own personal living space as well as your investment portfolio.

The Benefits of VA Loans for an Investment Property

Couple looking at investment loan options
Talk with a lending agent to see if a VA loan would be right for your investment strategy.

If other options are available, why would an investor consider using a VA loan for an investment property? There are many reasons, but most notably is the fact that you can utilize these loans with 0% down. While you’ll still need money for closing costs and fees, you can buy an investment property (assuming you qualify) with literally no down payment. Not everyone will qualify, but it is an attractive option.

With a VA loan, you can also avoid paying mortgage insurance, which is often charged on many other mortgage options. While the cost may be counter-balanced with other fees, this can bring significant savings to your overall investment portfolio.

It’s possible to use multiple VA loans at one time. So if you purchase a property, live in it for a certain time, and convert it to a full investment, you can then use another VA loan for your next property; either a home you will live in for decades or another potential investment property. This is another significant advantage to using VA loans for investment purchases.

Work with Us for a VA Loan for an Investment Property

If you are interested in using a VA loan for an investment property, of if you simply want to learn more about options for your purchase, contact our staff today.

With knowledge and experience in the real estate industry, we are here to help you make the right choice.



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I hope you enjoyed reading this article. It's my goal to keep you updated with the latest real estate mortgage news. I'm proud to provide you with 100% original and unique content. Subscribe now to get high quality real estate mortgage content and articles delivered directly to your inbox. Chad Baker is Regional Manager for Cross Country Mortgage. Chad is consistently recognized in the top 1% of mortgage originators in the United States 2011-2019. Got a question for Chad? Call (858) 353-8331 or submit your question online