If you’re interested in buying a rental property and qualify for a mortgage backed by the U.S. Department of Veterans Affairs, you’ll be happy to know that it’s possible to use a VA loan for investment property purchases. Now, this isn’t necessarily a specific type of loan that’s used to buy real estate intended to be rented out, but it can be utilized in that way when certain requirements are met. VA loans can generally be used to buy most properties and are similar to FHA government-backed loans, where the entry requirements are not as rigid, with the difference being that VA loans typically don’t require a down payment.
A VA-backed mortgage loan is a great option for veterans and active-duty service members, as it can help them kickstart a real estate investment career. If your interest has been sparked, read further to find out what the benefits of using a VA loan are, as well as the restrictions, and what the application process looks like. Let’s begin so you can purchase a property and start earning rental income sooner rather than later.
Benefits of VA Loans for Real Estate Investors
Using a VA loan for investment property purchases comes with some great benefits. One that stands out from the rest is the ability to buy a home with no down payment, which can make a property purchase easier for those who don’t have an extra $50,000 lying around.
Also, VA loans offer lower interest rates compared to traditional loans, which can save an investor a lot of money over the life of the loan. There’s also no requirement for private mortgage insurance (PMI), and this can lower monthly expenses.
VA loans allow for more savings than a conventional loan, and this can free up money to invest in other opportunities. On top of all this, VA loans are much easier to qualify for when it comes to credit scores and income levels. You can also research other loan types that allow for easier approval in my article – Financing 101: Exploring Your Options for Rental Property Loans.
VA loans make for an easier way to get your foot in the door when trying to generate rental income. I personally know several investors who got their start using this strategy. It provided them with a jumping board that led to buying several other properties in the years to come. What I mean by this is that each property builds up equity, which can be used for the down payment on the next property.
If you’re wondering why someone would use their equity for the down payment of an additional property when they could just apply for another VA loan that doesn’t require one. The reason for this is there’s a requirement with VA loans where the applicant must reside in the property. So it would be complicated to buy multiple properties with this funding source, and we’ll cover that in the next section.
Utilizing a VA Loan for Investment Property Purchases: Eligibility & Restrictions
There are some basic eligibility requirements for obtaining a VA loan, starting with qualifying for a Certificate of Eligibility (COE) that you would need to provide to your lender. Let’s take a look at what’s needed to qualify.
1. VA Loan Eligibility Requirements
Must currently hold or have previously held one of the following positions below to be eligible for a COE:
- Service Member: If you have completed a minimum of 90 consecutive days of active duty without any interruptions in service, you fulfill the basic active-duty service requirement.
- Veterans, National Guard & Reserve Members: The minimum active-duty service requirements depend on when you served. You’ll find information on service dates by visiting the va.gov website page.
- Surviving Spouse: You may be eligible for a COE if you’re the surviving spouse of a veteran or if your spouse, who is a veteran, is currently listed as missing in action or is being held as a prisoner of war (POW).
In addition to the above, per the U.S. Department of Veterans Affairs, you may be eligible for a COE if you meet at least one of the following requirements below that pertain to this: You’re an American citizen who has served in the Armed Forces of a government which was allied with the U.S. in World War II, or you served as a member in a specific organization, such as the following:
- Public Health Service Officer
- Cadet at the United States Military, Air Force, or Coast Guard Academy
- Midshipman at the United States Naval Academy
- Officer of the National Oceanic & Atmospheric Administration
- Merchant Seaman During World War II
Along with this service member qualification, there are certain restrictions and limits that the applicant must agree to when applying for a VA loan for investment property purchases.
2. VA Loan Restrictions that Affect Investors
As a real estate investor applying for a VA loan, the restriction that would have the most impact on your eligibility, and what would become an issue if trying to buy multiple properties, would be having to reside in the property for up to one year.
1-Year Occupancy Requirement
VA loans are used to purchase a primary residence where the loan applicant personally lives within the home, and this is actually a requirement. The terms state that to qualify for the VA loan, the applicant must agree to reside within the property for up to one year. As you can imagine, this becomes a big problem for someone who would like to use the property to generate rental income. However, there are workarounds to this that make it possible for investors to qualify for a VA loan and use the property to earn rental income from the start.
The 1-year rule generally comes with a move-in date requirement that starts no later than 60 days after closing. They want to make sure the loan applicant will be living in the property, but this doesn’t mean other people can’t reside there as well – and this is where the workaround comes into play. Investors who buy a single-family home using a VA loan can simply rent out a room for the year. This brings in cash flow that can be applied to the mortgage and fulfills the “primary residence” rule. Others who would rather not have a roommate, can buy a multi-family property, either a duplex or four-flex, where they live in one of the units, and the others are rented out to tenants.
To gain a better understanding of both property types to determine which might be best for you and your situation, head over to the following articles:
- The Benefits of Investing in Single-Family Homes
- The Advantage of Investing in Multi-Family Duplexes
VA Loan Limits
Individuals who have a current loan backed by the U.S. Department of Veterans Affairs, or have a VA loan default on their record will be subjected to loan limits. What this means is that a “limit” refers to the highest amount the department will guarantee without the applicant having to make a down payment.
For 2025, $806,500 is the typical maximum amount of money that can be borrowed without having to make a down payment. Check with your local county to ensure this amount applies to their specific rules because some counties that are in high-end areas have higher limits. For example, some San Francisco counties have a limit of $1,209,750.
Investors who have a full entitlement won’t have to worry about loan limits for loans over $144,000. What is a full entitlement? According to the Veterans Affairs, it’s when one of the following applies:
- You’ve never used your home loan benefit, or
- You’ve paid a previous VA loan in full and sold the property (in this case, you’d have your full entitlement restored), or
- You’ve used your home loan benefit, but had a foreclosure or compromise claim (also called a short sale) and repaid the loan in full
How to Apply for a VA Loan When Buying an Investment Property – The Application Process
When obtaining a VA loan, you can actually move forward with your preferred lender, but only after being granted a Certificate of Eligibility. You can also obtain the COE through your lender, or apply for one through the Request a VA Home Loan COE page, or by mail. If you’d like to request a COE by mail, you’ll need to fill out VA Form 26-1880 and send it off to your local regional loan center. Once these items are completed, you can easily check the status of your request online.
Getting approved for the COE is only the first step of the process, though, with the proceeding steps depending upon the loan type you choose and the lender you go with. Once you have your COE, the lender you’ll be working with, as well as the property you’re interested in purchasing, your lender will request a VA appraisal of the property.
Other approval steps include the lender evaluating your income, credit, and VA appraisal. Remember, VA loans are more lenient with credit history, so if your credit score is less than stellar, don’t let that stop you from applying.
Once everything is approved, your lender will work with you to obtain the title of the property. As you can see, when it comes to applying for a VA home loan, the upfront process is a bit different because you have to go through the steps to get your COE and also have the lender obtain a VA appraisal, but after that, it’s pretty much the same as working with a lender who is offering a non-VA loan.
Reach Out to a VA Loan Representative or Morris Invest
You can always contact the U.S. Department of Veterans Affairs if you have questions regarding the application process. In addition to this, if you’re looking into purchasing a rental property through Morris Invest, know that we often work with clients who use VA loans, so we’re capable of answering any questions you may have.
If you’re not a veteran and you’re looking for a specific type of loan that’s used to buy real estate, I suggest bookmarking the following article for future reading – Non-Recourse Financing for Investors.
Power Resources for Real Estate Investors
Whether you’re using a VA Loan to start reeling in rental income, or utilizing another funding source, you’ll want to ensure you’re ahead of the game when it comes to a strategy for building wealth through real estate. That said, I recommend looking over the following resources:
Also, be sure to dive into these articles to increase your investor IQ:
- How to Buy a Rental Property With No Money Down
- Steps for Retiring Early With Rental Real Estate
- Creating Effective Inspection Checklists for Your Rental Property
- Using a HELOC to Invest in Rental Real Estate
Leveraging VA Loans to Generate Rental Income
If you’re eligible for a VA loan, take advantage of the opportunity because where else can you get a mortgage that doesn’t require a down payment? In addition to this, it just makes it easier to get the ball rolling when it comes to investing in real estate, especially with the fact that VA loans have less stringent credit score requirements.
For those who are looking for a rental home where you’re able to easily live in the property for the first year to pass VA loan requirements, know that Morris Invest has multi-family duplexes in locations that have a high rental demand. On top of this, we’re a full-service investment company, which means we take care of all the details for you – market research, assigning a professional property manager, filling the rental with a tenant before or at closing, and so on.
Feel free to contact Morris Invest if you would like to hear about our new construction rental properties and how you can easily place one in your portfolio. In the meantime, dive into the following video that provides professional tips on investing in rental properties:
