Investing in real estate can be an excellent way to build long-term wealth. And if you‘re eligible for a VA loan, you have a unique opportunity to get started with very little money down. However, there are specific rules around using VA loans for investment properties that you need to understand.
In this comprehensive guide, we‘ll cover everything you need to know as a veteran or service member looking to leverage your VA benefits to invest in real estate.
Overview of VA Loan Program
The VA loan program was created to help veterans and active-duty service members purchase homes. Key benefits include:
- Requires no down payment or mortgage insurance
- Offers competitive interest rates
- Allows sellers to pay closing costs
To qualify, you must meet service requirements and intend to use the home as your primary residence. So while VA loans can be great for buying your own place to live, they weren‘t necessarily designed for buying investment properties.
But that doesn‘t mean it can‘t be done! Here are two compliant ways to use a VA loan to invest in real estate:
Rent Out the Property After Living There
Most lenders require you to move into the home within 60 days of closing and live there for at least 12 months. After that, you‘re typically free to move out and rent the property to tenants.
This strategy allows you to purchase an investment property with no money down. And after renting for a year, you can start generating monthly income.
- Little to no upfront cash needed
- Lock in low interest rates
- Appreciation and cash flow potential
- Must be willing to move after a year
- Loose tenant screening risks
Another approach is to use a VA loan to purchase a fixer-upper property. You‘ll live there for a year while renovating. Then sell for a profit.
This allows you to add value through upgrades and capital improvements. And real estate investors often find the best deals on properties needing work.
- Purchase below-market value properties
- Maximize value through renovations
- Short 1-year investment timeline
- Requires renovation experience
- Permitting and delays possible
- Payback contingent on successful sale
As you can see, VA loans open up unique real estate investing opportunities for eligible service members and veterans. Just be sure to consult your lender to clarify restrictions and get preapproved before making offers.
With the right property, exit strategy, and expert guidance, you can leverage your VA benefits to begin building a rental property portfolio or house flipping business.