By Bill Lyons | Updated on February 25, 2025
TABLE OF CONTENTS

    Investing in real estate is a great way to build wealth over time, and a VA loan may help you purchase investment property. If you’re a service member, veteran or surviving spouse, you may have heard you can only use your VA entitlement to purchase a primary residence.

    While the VA restricts what you can use your VA loan for, you can use it to invest in real estate in a few ways. Using a VA loan for investment property comes with a few caveats, but it might be well worth it if you want to grow your wealth and earn a passive income.

    So how can you use a VA loan for investment property? VA loans are much stricter than other types of home loans regarding occupancy requirements, but there are still ways to use them for investment properties. This article will discuss everything you need to know about using a VA loan for rental property and other real estate investments.

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    KEY TAKEAWAYS

    • VA loans can be used to buy investment and rental properties as long as you meet occupancy requirements.
    • Eligible properties include single-family homes, multi-unit properties (up to four units), and mixed-use spaces.
    • If a VA loan doesn’t fit your needs, options like conventional loans, DSCR loans, or other non-QM mortgages might better support your investment goals.

    Can You Use a VA Loan for an Investment Property?

    You can use VA loans for investment properties, but there are a few caveats. For example, VA loans are for primary residences only, but there are ways to use them for rental properties since the VA allows several exceptions. 

    In particular, borrowers can use a VA loan for an investment property if they buy a multi-unit property and reside in one of the units. Borrowers can also leverage the equity they build in a property purchased with a VA loan to pursue real estate investment opportunities. In the next section, we describe some of the common strategies for using a VA loan to buy a rental property. 

    How to Buy an Investment Property Using a VA Loan

    VA loans are primarily designed for primary residences, but they can still be used creatively for investment purposes. Here are some of the key ways to make it happen:

    • House hacking: One of the most popular strategies is house hacking. If you buy a single-family home, you can rent out spare bedrooms while living in the property. This allows you to generate rental income, which can help cover your mortgage payments. There are no restrictions on the number of rooms you can rent out as long as you continue to live in the home.

    • Multi-unit properties: You can use a VA loan to purchase multi-unit properties with up to four units. The requirement is that you live in one of the units as your primary residence. The remaining units can be rented out to generate passive income. This strategy is particularly appealing if you’re looking to break into real estate investing while leveraging the no-down-payment benefits of a VA loan.

    • Mixed-use properties: VA loans can also be used for mixed-use properties, as long as the residential portion of the property is the primary focus. For example, if you buy a building that is 75% residential and 25% commercial, you could qualify. However, the property cannot exceed four total units.

    • Rental income for loan qualification: Rental income from the property can also help you qualify for the loan. Lenders usually count 75% of the projected rental income toward your income, which improves your debt-to-income ratio. 

    Why Use a VA Loan to Invest in Property?

    VA loans offer unique advantages that make them an attractive option for eligible borrowers looking to enter the real estate market. 

    Here are some key benefits of using a VA loan to invest in property:

    • No down payment: VA loans allow you to purchase property without a down payment, which helps free up your capital for other investments or expenses.

    • Competitive interest rates: VA loans typically have lower interest rates than conventional loans, reducing your overall borrowing costs.

    • No private mortgage insurance (PMI): Unlike most conventional loans, VA loans don’t require PMI, which in turn can lower your monthly mortgage payment.

    • Rental income potential: Rental income from your property can help offset mortgage costs and may even be factored into your loan eligibility.

    • Beneficial refinancing options: Once you build up some equity in your home, you can use a VA streamline refinance to get a better rate and lower your monthly mortgage payment. You can also apply for a VA cash-out refinance loan, which can provide funds for home upgrades, additional investment projects, and more. 

    Alternative Investment Property Financing Options

    Using a VA loan for investment property is possible, but it’s extremely limited. Since occupancy requirements demand that you live in the home for 12 months and use it as your primary residence, using a VA loan for an investment property isn’t the right fit for every borrower.

    Instead, there are several other investment property loans to consider, including:

    Conventional Loans

    Conventional loans are ideal for individuals who already own a primary residence with a VA loan. While you can’t use your VA benefits for investment property unless you intend to live in it, conventional loans are more flexible and can be used to purchase any type of property.

    With a conventional loan, you can expect to make a down payment of 20% of the home’s purchase price, but for investment properties, lenders might require as high as 30% down. Additionally, conventional loans are more strict in terms of credit score and income, and potential future rental income isn’t factored into your DTI.

    Non-QM Mortgages

    Non-QM loans are more flexible than conventional loans and allow you to qualify based on bank statements and assets instead of pay stubs and W-2s, making them ideal for individuals with less consistent income who can still afford their monthly mortgage premiums.

    Mortgage rates on non-QM investment property loans and hard money loans are usually higher compared to conventional loans. They also offer a more streamlined approval process because they have less stringent requirements.

    DSCR Loans

    A DSCR loan is another type of property investment loan that allows you to qualify based on cash flow instead of personal income or job history. DSCR loan approval depends on your debt service coverage ratio (DSCR), which compares your gross rental income versus the mortgage debt and determines whether you can repay the loan.

    Generally, the higher the DSCR, the more operating income you have to cover your debts and pay for additional expenses like repairs and maintenance on rental properties.

    Applying for a VA loan

    So can you use a VA loan for an investment property? Yes, but you should consider the potential challenges you face, such as occupancy requirements and restrictions on the number of units a property can have. In any case, applying for a VA loan is simple and consists of the following steps.

    1. Get your Certificate of Eligibility (COE)

    If you’re unsure whether you qualify for a VA loan, you can confirm your status with the VA by obtaining your Certificate of Eligibility before applying for a mortgage.

    If you know you’re eligible, your lender can secure your COE on your behalf by requesting it with the VA, which may streamline the process.

    The COE is crucial for lenders to help them determine whether the VA approves you for a loan. If you’re unsure of your status and don’t want to apply for a loan until you know you’re eligible, you can request the COE yourself before contacting a lender.

    2. Apply for pre-approval

    Mortgage pre-approval is crucial at the beginning of the process because it can tell you whether you qualify for the loan and how much a lender may be willing to give you.

    Pre-approval can tell you your home affordability to help you start shopping within your price range. Sellers prefer to work with serious buyers who have obtained a pre-approval letter.

    A mortgage pre-approval doesn’t always mean that you will be approved for the loan or a certain amount when it comes time to fill out the complete mortgage application, but it can give you an idea of how likely you are to be approved.

    Therefore, don’t be surprised if a lender approves you for a lesser amount, especially if your financial situation has changed since you received your initial pre-approval. The actual application approval process considers a specific property and appraisal to determine how much you qualify for.

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    3. House hunt and make an offer

    Armed with a pre-approval, you can begin the house hunting process. The home must meet the VA’s minimum property requirements to get approved for the loan. When you’ve found a home you like, you can make a purchase offer and allow the seller to accept, reject or counter.

    4. Application

    Once you have found a home, you can apply for a VA loan with your chosen lender and undergo appraisal and underwriting.

    An underwriter will verify your financial information to ensure you qualify for the loan based on the lender’s requirements. At the same time, the VA conducts an appraisal to approve the home for purchase.

    5. Closing

    Once the home passes the VA’s appraisal and you’re approved for the loan, you can lock in your interest rate and close. This means paying closing costs, including your VA funding fee.

    Explore VA Loan Investment Property Options

    A VA loan is an appealing offer for eligible borrowers who want to avoid a large down payment and PMI.

    Using a VA loan for an investment property ultimately depends on the type of property you’re purchasing. You must also adhere to the VA’s occupancy requirements.

    However, you may be able to use a VA loan for rental properties with up to four units and house hacks to reduce your mortgage payments. The VA allows some exceptions, so if you’re ever unsure, you can contact them or your loan officer for more information.

    If you’re interested in exploring how to use a VA loan for a rental property, reach out today. We specialize in VA loans and can walk you through the lending process and relevant guidelines. You can also download our free Griffin Gold app to learn more about your options for financing investment properties and access financial management tools. 

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    Frequently Asked Questions

    Can you assume a VA loan as an investment property?

    Yes, VA loans can be assumed, and this includes civilians under certain conditions. Assuming a VA loan allows the new buyer to take over the existing loan terms, such as the interest rate and remaining balance, which can be particularly beneficial if the loan has a lower rate than current market rates.

    To assume a VA loan, the new borrower must meet the lender’s financial requirements, such as income and creditworthiness, and agree to the terms of the loan. The process doesn’t require the borrower to be a veteran; however, if the new borrower is not eligible for VA benefits, the original borrower’s entitlement will remain tied to the loan until it is fully paid off.

    Can I use the funds from a VA cash-out refinance to buy a rental property?

    Yes, a VA cash-out refinance can be used to access the equity in your current home and put it toward purchasing a rental property.

    This refinancing option allows you to borrow up to 100% of your home’s value, depending on the lender’s guidelines. The funds can then be used as a down payment on a rental property or to cover the full purchase price, depending on the investment.

    This flexibility makes the VA cash-out refinance a popular option for veterans looking to diversify their real estate portfolio or generate passive income.

    Can I use my VA loan to build and rent out an ADU?

    While you can’t use a VA purchase loan to build an ADU intended for rental purposes, you can use a VA cash-out refinance to fund the project. By refinancing your existing home loan, you can access the equity in your property and use those funds to build an ADU.

    This is a strategic way to maximize the benefits of your VA loan while leveraging the increasing demand for rental spaces. This approach can increase the value of your property, giving you long-term financial benefits in addition to the monthly rental income.
    Bill Lyons

    Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 23 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 11 years in business.