VA home loans can be a great resource, offering veterans and service members competitive interest rates and zero down payments. But VA loans can also be used to generate rental income. Here’s everything you need to know about how to use a VA loan for rental property.

Can You Use A VA Loan For An Investment Property?

You can use your VA loan to buy an investment property, but you’ll need to meet several guidelines.

VA loans are intended for a primary residence, meaning you can’t buy a separate property with it. But you can get rental income from a VA loan by renting out space in your property.

Properties purchased with a VA loan can be multi-family homes with up to four units. To use your property as an investment opportunity, you’ll want to find a property that’s revenue exceeds its costs. If your rental income is more than your mortgage payment and property taxes, you’ll make a profit on your property.

VA Loans Occupancy Requirements

To rent your home with a VA loan you’ll need to follow several guidelines. Most notably, you must adhere to the VA loan occupancy requirements. It is required to live on the grounds of any property that is financed with a VA loan.

The amount of time you’ll need to occupy the property varies by loan lender. Often, lenders will require that you live on the property for at least one year. Discuss with your lender to know exactly how long you’ll be obligated to stay in residence on the property.

Use the Property as a Primary Residence

In conjunction with living on the property, the home must be your primary residence. That means that it is not possible to use a VA loan to purchase a second home or a vacation home.

To make a home your primary residence you must live on the property for the majority of the year. If you cannot meet this requirement, you won’t be able to finance the property with a VA loan.

Does Rental Income Help to Qualify For a VA Loan?

You can use your projected rental income to qualify for a VA loan. Provided you meet all loan requirements, you can use the projected rental income in your loan application. Using rental income in your loan application can help you qualify, give you a better mortgage rate, or give you a higher loan amount.

However, some lenders will require additional assurances that you will be an effective manager and rent collector of a rental property. It will be helpful to show that you have a history of collecting rent as a landlord.

Depending on the lender and your experience in property management, rental income can also be partly factored into your loan estimate. If you don’t have much experience as a landlord, lenders might consider a percentage of your estimated rental income.

What Types of Rental Property Can Be Purchased With a VA Loan?

There are limits on the types of homes that can be purchased with a VA loan. Your property can be a single-family home or a small multi-family home. Multi-family homes purchased by VA loans cannot exceed four units.

Additionally, multi-family homes also need to have independent utility services or shared water, sewer, gas, and electric lines. Units also must have individual shut-offs for these services. You can check the VA lender’s guide to read the full list of requirements for multi-unit properties.

Condos also have separate guidelines to follow. The condo you intend to purchase must be on the VA’s approved condo list. If the property is not already on this list, you can apply to have it added.

How To Use A VA Loan For Your Rental Or Investment Property

You can use a VA loan as an investment opportunity. To use a VA loan to make a real estate investment, you’ll want to find a property that will pay more in rental income than you expect to pay for your mortgage and property taxes.

Remember that you cannot exceed four rental units for your property and you need to reside in one of them. So, you cannot expect to have more than three renters for your property.

Qualifying For a VA Mortgage Loan

The Department of Veterans Affairs offers quite a few home loan benefits to military service members and their families. To qualify for a VA loan you must be one of the following.

  • A veteran
  • An active duty service member
  • A member or discharged member of the National Guard and Reserve
  • A surviving spouse

A surviving spouse is anyone whose spouse died while on active duty or had a service-connected disability.

If you have questions on what you can do with your VA loan call 602-908-5849 for more information.