4 min read May 13, 2024

How to Use a VA Loan For an Investment Property

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Tanvi Shah

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Tanvi Shah

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Tanvi G. is a content editor who brings a wealth of real estate knowledge to the table. She has a keen eye for detail and delivers exceptional content that is accurate and easy to understand.

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In 2023, the VA issued 400,692 loans nationwide. They are the go-to choice for veterans when buying a primary home. VA loans offer benefits like no down payment and competitive interest rates. Despite being designed for homes, you can still generate rental income or get returns on investment.

📉 VA loan for investment property

  • You can rent out your primary home before 12 months if you get transferred elsewhere.
  • VA streamline refinance releases you from VA occupancy requirements. This way, you’ll be able to rent out your first residence and buy a second primary residence.
  • You can refinance your VA loan into conventional loan to eliminate the occupancy requirements.

Can You Use a VA Loan for an Investment Property?

No. You cannot use a VA loan to purchase an investment property. They are mainly used to assist veterans, active-duty service members, and some surviving spouses to purchase a primary residence. 

However, there are ways to use a VA loan for buying an investment property.

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Ways to Purchase an Investment Property with a VA Loan

As you cannot purchase an investment property directly using a VA loan, you can consider your primary residence as your investment property. And use the VA loan to purchase the primary residence. 

Here’s how you can use a VA loan for investment property:

1. Rent Out Extra Space in Your Home

Although you cannot directly use a VA loan for rental property, you can rent out an extra room that you might have. This can be a good way to earn passive income. Moreover, you can use this money toward the monthly payments on your VA loan.

2. Buy a Multi-unit Property

You can buy a multi-unit property of up to 4 units through your VA loan. You must occupy one of the four units as your primary residence to fulfill the VA loan occupancy requirements and you can rent out the non-occupied units.

3. Buy A New Home With Your VA Entitlements

The Department of Veterans Affairs offers some degree of guarantee to each borrower in case they default. You can use this entitlement to buy a second home. VA entitlement includes types, which are:

  • Basic Entitlement: All veterans receive a basic entitlement of $36,000. The VA will cover $36,000 of their loan if they default on mortgage payments for up to $144,000.
  • Bonus Entitlement: Apart from basic entitlement, the VA also guarantees 25% of the loans that exceed $144,000. It allows you to buy a home at a higher price.

4. Rent Your Home After 12 Months

You can rent out your primary residence if you’ve lived in it for at least 12 months. Moreover, you can rent it out if you’re still in service and have been transferred to a new location before 12 months. In this case, the VA does not require the new tenant to be a veteran.

5. Refinance VA Loan Into a Conventional Loan

Conventional mortgages have fewer restrictions on the type of property. So you can finance a rental property with one even though VA loans have more flexible qualifying requirements. That’s another way to buy an investment property through VA loans.

Bottom Line

VA loans prove to be the easiest way to finance a primary home purchase for veterans. To buy an investment property through a VA loan, you must treat it as your primary residence.

However, you can rent out extra spaces or units in that home and earn rental income. In addition, you must adhere to all the occupancy and property requirements to purchase with a VA loan.

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Frequently Asked Questions

Can you use a VA loan to buy a duplex?

Yes, you can buy duplexes, triplexes, and quadplexes through a VA loan.

Can you use a VA loan for rental property?

No, you cannot directly buy a rental property. However, you can rent out extra space or units in your primary home to earn passive income.

Can I use my VA home loan overseas?

No, you cannot use VA loans to purchase a property in another country. The use of VA loans is limited to the US subcontinent.

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