How to Use a VA Loan for Your Rental or Investment Property

Follow the steps and tips below to make your primary residence serve double duty as a real estate investment property.

1. Make sure you meet the eligibility criteria

The first step you will need to take before applying for a VA loan is to ensure that you meet at least one of the following VA eligibility requirements:

  • Veterans and Active Military: You will need to have served 90 consecutive days in wartime or 181 days of active duty in peacetime.
  • National Guard or Reserves: You will need to have completed 6 years of service before being honorably discharged or placed on the retired list or have served on active duty for a total of 90 days with at least 30 consecutive days.

If you meet any of the above conditions – or if you are a surviving spouse who did not remarry before reaching age 57 or before December 16, 2003 – you should be able to apply and be eligible for your Certificate of Eligibility (COE), which will prove to you that you qualify for a VA loan.

2. Rent a unit in your single-family home

Although your property must be used as your primary residence, you are allowed to rent out one or more rooms of your single-family home. So if you want to finance with a VA home loan and generate rental income, consider buying a home with additional rooms or space.

You can also buy a property that has a detached apartment on the land or a garage that has been converted into living space if you prefer more separation from your potential tenants.

3. Buy a multi-unit property

The VA allows you to purchase a multi-family property of up to 4 units, such as a duplex, triplex or quadruplex – also known as a quadplex.

One unit should serve as your primary residence, so you will need to live on the premises. But you could generate additional income by renting out the units you don’t occupy

4. Buy a second home with your VA rights

Instead of traditional loan limits, the Department of Veterans Affairs uses VA loan fees to determine the maximum amount they will reimburse your mortgage lender if you are unable to repay your loan.

The VA offers two types of rights:

  • Full right : Full entitlement means you never used your home loan benefit or your full entitlement was reinstated because you paid off a previous VA home loan in full. The VA no longer imposes limits on loans over $144,000 for eligible borrowers with full entitlement. The VA also guarantees repayment of 25% of any loan amount that your mortgage lender approves for you. So, if you have all the rights, you are not limited as to how much you can borrow without paying a deposit.
  • Partial right: Also called reduced entitlement or remaining entitlement, this means that you currently have a VA loan that you are paying off, still live in a home that you purchased with a VA loan that you have paid off in full, or have already defaulted. on a VA mortgage.

With a partial entitlement, you may be able to buy a second home with no down payment, but you’ll need enough remaining entitlement to cover 25% of your new mortgage. Otherwise, your VA lender may ask you to put down a deposit to cover the difference.