Most lenders would immediately answer “No” to the question of whether you can buy a rental property with a VA loan. They would be both correct and incorrect.
VA defines an investment property as one that the veteran does not occupy and a primary residence as the property you intend to occupy. That’s pretty straight forward...or is it?
Let’s look a little closer:
VA states that in order to buy a home using a VA loan, you must certify that you personally are going to occupy the home and that you intend for the home to be used as your primary residence now and in the future. This does not mean that you can purchase a home, say you’re going to live in it for a month and then turn it into a rental property. That, in most cases could be deemed as mortgage fraud.
So how is it you can purchase a home with a VA loan and use it as an investment property? Seems impossible doesn't it?
What many people forget is VA allows you to purchase a property with more than one unit (up to 5 units if one is a business and one is being occupied by the veteran). Because this rarely comes up, let’s just say you can use a VA loan to purchase a home up to 4 units. You just need to occupy 25% of the property or generally speaking, one of the units.
Are you seeing the loophole?
So you have a property with up to 4 units. You’re occupying one of the units. What are you going to do with the additional units? Assuming there aren't dozens of cats involved and you’re not crazy, more than likely you’re going to rent the other units out.
And there’s your rental property.
Obviously it’s not the “standard” investment property but it’s an investment property nonetheless and one that will generate loads of income. The great thing about additional units is the VA loan limits go up with each unit, allowing you to purchase a multi-unit property with no money down and if qualifying is a question, any units that are occupied and have 12 month leases can be counted as income to help you qualify.
Image courtesy of Stuart Miles / FreeDigitalPhotos.net
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Frequently asked questions about VA loans
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