Technically speaking, a VA loan is meant for veterans or active military personnel to use to buy their own home. When you apply for a VA loan, you have to sign a document that you will personally live on site within sixty days of the closing date. That being said, you can buy up to a four-unit building so long as you live in one of the units. That leaves you free to rent out the other three. Read on for more details.
A VA loan often requires no money down in order to start it. So long as the building meets the size cap for the number of residential units (and one small business unit) you can buy it with your VA loan. You’ll also be eligible for the tax benefits that depreciation gives on rental properties.
When you do rent out your other units on the property, it gives you the chance to live almost mortgage free, because the rents you collect can cover the cost. You will want to be sure that you can rent in the area you choose and be successful at it. Otherwise, your investment won’t pay off. It will take a bit of research to discover which homes can be bought for the least amount possible but still rent for a solid amount.
You will also want to find a real estate agent or Realtor who is an expert at finding investment properties. Be sure to give him or her all of the criteria you are looking for, so he or she can find all of the right homes with the right number of units for you. That person can also advise you about the strengths (and weaknesses) of an area, like schools or transportation options. Your agent might also be able to help you with determining the right rent for your area. You will also want to find a separate expert who can help you with background screening each applicant.
With the significant amounts of foreclosures that occurred during the recession, there are a lot of properties that can be purchased for a discount. It also means that there are a lot of people looking for good places to live. That said, there are a number of risks involved with renting to people, and someone who looks good on paper may be a deadbeat later on.
Be prepared to cover the full cost of the mortgage, at least for a while, until the rental income starts to come in. You will also need to cover any utilities for the building, as well as any repairs or maintenance costs that crop up. As with any landlord situation, you will have to spend some time, and money, taking care of the property. You may get a tenant who needs your help in the middle of the night. There may be some costs you will need to incur regarding compliance with legal requirements in your state.
Your VA loan can set you up with a good investment that can generate income for years to come. You just need to be prepared to put in a little work and some time, but you can translate that loan into a smart choice.