My Story of Buying a Commercial Property with a VA Loan

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Before I started by real estate investing education with Bigger Pockets it was the summer of 2013 and I was searching for that perfect house. After months of research I found the perfect house build in 1900 in a historic part of town. Armed with my VA loan I was sold on getting this property. For some reason in my area alot of real estate owners had rezoned their properties into commercial properties. It is also one of the reasons I found this house no one was looking at it because it was listed as a commercial.

I had read all the guidelines, YOU CANNOT BUY COMMERCIAL PROPERTY WITH VA LOAN. So I asked my lender is there a way around this road block and to my surprise there is. If the property your buying was originally built as a residential property and it is obvious that it is residential you can purchase it. I did have to get a letter from the city stating that they defined this house as a residential property it had just been rezoned. 

While I am new to bigger pockets I hope that this information can be used to benefit fellow members. Thanks. 

Interesting, that's good to know! Another interesting tidbit I recently found out is that apparently you can list your projected rental income for VA loan multifamily homes without having a history as a landlord, provided the rental contracts are in place prior to purchase. That said, I'm not sure the details and I haven't actually tried this, so if it's something you're interested in, it's probably worth discussing with your mortgage broker.

How many units are in the property? Any tips or tricks for finding reclassified properties like this?

The home I bought was a two story SFH but it had a kitchen on each floor. So I put up a wall and made it a two unit two bed one bath. It has worked out pretty well for me. In terms of finding these deals there are about 3-5 major commercial brokers in my area I would just go to their websites and see if they had anything that looks like a house. I found that these properties some how fall between the cracks on site like zillow. Not sure why.

That is awesome to know!  As always if there is a will, there is a way :)

@Jonathan Dudley  Great info. I'm looking for a multifamily now myself with the intention of using a va loan.

@Jonathan Dudley  One more question here, are rezoned properties (previously residential) with greater than 4 units va loan eligible? E.g. If I find rezoned a 7-unit property, do you have any idea if that would that still qualify?

@Brendan Morin  I second that question. Would love to know the answer to it as well. 

Great post Jonathan! I am curious to know how you go about finding out whether or not it was originally built as residential and rezoned. Let's say you find a property listed as retail/commercial but it looks like a house? What is the next step?

Thank you so much for sharing with us!

My understanding is the federal law that created the VA and similar programs such as FHA define a residential home as 4 units or less. I highly doubt there is a way around this, your best bet would be to stick with a 4 unit.

The VA loan officer required me to prove that my home was built for residential purposes. The real litmus test is getting the loan officer to believe that the property was intended for residential use when it was built.  

To prove this I went to the planning and zoning office in my city. They would be the best source to determine what the house was built for.  For me it was very obvious my home is 115 years old and it looks like a house. Before you go to the city, I would look at the structure of the house, what kind of neighborhood is it in and try looking in older tax records. My property was rezoned in 2012, but before that is was listed as residential. 

My property is still zoned commercial too, I never had to change it back. Best of luck. 

@Jonathan (tagging doesn't seem to work mobile) thanks for the reply and advice.

For anyone else who finds this post with the same question as me regarding 5+ units, I messaged the VA and got this answer:

"The maximum number of units is 4. The residential appraisal form 1025 for multiple unit properties is for 2 to 4 units. Anything larger than 4 units requires a commercial appraisal and by definition is a commercial property and not eligible for VA guaranty. With regard to zoning, VA requires that residential be an allowable usage no matter the zoning type and the highest and best use of the property must be residential and not commercial. The property must be residential in nature. We see many properties that are in an area that was zoned residential and later became commercial/residential and are still acceptable since residential usage was still typical in the area."

Hope that helps!

@Brendan Morin  awesome stuff. What e-mail address did you send a message to? That seems like a handy thing to have. Thanks. 

@Tyler Flagg  I used this form I found through the va.gov website. It was a shot in the dark, but they replied surprisingly quickly (2 days I think?) with a pretty thorough response. They also gave me resources to contact my local VA office to follow up with further questions.

Overall I'd say I was pleasantly surprised with the level of customer service, considering I wasn't really sure I'd hear back about anything I entered in on that form.

Great to know. Thanks dude!

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