Using your VA loan for a rental property or real estate investment is not the purpose or goal of VA loans, so if this is your intention, you may want to keep it under your hat. In some regards, turning your VA loan and home purchase into an investment is something that happens by accident. Try not to go into the deal with the goal of making a money-making investment.
In short, you can buy the rental home you are renting if the owner wants to sell. If you have been living there already, there shouldn’t be a big problem when the house is inspected for suitability. You can also buy a property and let it out to strangers, or you can buy a house with your VA loan and hope to make a profit once you sell.
Working Out the Math
Before you run off to make money, consider if you can afford both the VA loan payments and the added expense of owning a house. Try a tool like What’s My Payment. It is a VA Loan Calculator on the WhatsMyPayment page, and it helps you create your budget. This is important because you need to finish your investment with a better credit rating than when you started. That way, you can take your profits, get another VA loan with a better rate, and start the process all over again.
Letting Out a House
When you buy a house so that you can attract tenants, then you are letting out the house. Almost all VA loan rules say you cannot use a VA loan to buy a property with the goal of letting it out. In fact, almost all of the VA loan companies say you have to live in your house for a year or two before you are able to do anything. Unless you have the money to pay off the loan right there, then you will need to use the house as your primary residence for a while.
However, once that time period has elapsed, it is okay (in most cases) to start having tenants. This means you can let out your house or your rooms and make a little money. Just be careful when you make your plans because owning a house has more monthly costs than simply renting a house. Plus, remember that you also have to find a place to live and pay rent if you are not staying in the house yourself.
Making an Investment
This is a little trickier for two reasons. The first is that VA loans are built to stop people from exploiting them for financial gain. The second is that buying a property that will genuinely appreciate and make you a profit on your investment is very tough.
The VA loan company has to approve the property you are going to buy, and there are several types and varieties of property that they simply will not allow you to buy. For example, there are those slick condo advertisements where they guarantee your investment will pay offer in a big way once they are built, or after a few years, and yet they fail and people lose money. The VA loan company is aware of these scams and so will often refuse to finance a VA loan on condominiums. There are lots of examples in this area where the VA loan company will not approve your loan.
As mentioned, the other problem is that finding a property and making a profit is very difficult. There are people who do this sort of thing for a living, which means you have a lot of competition. You can apply for a VA loan that allows you to buy a less-than-perfect house and then fix it up, and they will even allow you to factor the repairs into your loan amount. However, the work has risks, there may be added costs, and the fact is that your fixer-upper building may not sell for a profit when all is done. The only outright benefit of a VA loan in this instance is if you want a quick loan without having to wait and save up a deposit first because most VA loans don’t ask for a deposit upfront.
