Anyone familiar with using the VA Loans for investment purchases?

17 Replies

I’m looking to get involved in rental property investment, development and management (newbie 😊). I have this insane idea that I could make this happen with a family member who happens to be a war Veteran. I’m looking to meet with attorneys, brokers and experienced investors for advice, mentorship and potentially business partners. Are you the person I’m looking for? I’m in NYC. Target markets are Hampton, Va., Tampa and Jacksonville, Fl., Boston, Mass., NJ and NYC.

Good morning Heyward,

The VA can be a powerful benefit to use in terms of investing but it's definitely not as short term as some people think because you have to live in the property for at least 12 months unless you have orders verifying you can't stay. You can use them for any residential purchase (up to 4 units) which is great. I spoke to a lender that said you can even go up to 6 units if you are dual military (both spouses are military and eligible for the VA loan).

you may be thinking the VA loan is something its not. you will have an owner occupancy requirement for starters. second, you cant buy a property to be used as an investment unless you live in it, such as a 2,3, or 4 unit property.

the only thing the VA loan does is to give you no money down and not have PMI. outside of that you would be better off going a different route.

i highly discourage anyone from misusing the VA loan, as it gives all of us veterans a black eye and could possibly lose this benefit.

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Originally posted by @Kevin Kwiatek:

Good morning Heyward,

The VA can be a powerful benefit to use in terms of investing but it's definitely not as short term as some people think because you have to live in the property for at least 12 months unless you have orders verifying you can't stay. You can use them for any residential purchase (up to 4 units) which is great. I spoke to a lender that said you can even go up to 6 units if you are dual military (both spouses are military and eligible for the VA loan).

the caveat to owning a multi unit property is that you will have to 1. prove you have land lorded before. 2. have income other than what you project for rent to cover the expenses.

Absolutely I agree with @Aaron T. No one should misuse the VA loan. It's a benefit that allows military families to achieve their goal of owning their own home. The reason they allow you to rent out your home is to have the flexibility of choosing when you wish to sell. If you are forced to move because of orders in a down market you would essentially be forced to lose money on your home.

Thanks for the bit on proof of landlording. I did not know that.

@Aaron T.

Heyward,

I used my VA Loan to purchase my first home in Nashville, TN a full year before I was planning to move there (I was still Active Duty when I purchased and had one more year stationed in California). My broker, Hunter Zinkil from LendUS LLC, is the #6 nationally-ranked VA lender and he knows the rules backwards and forwards. He also has relationships with folks who can answer the mail on situations like yours that may be considered "gray" in what is right and what is wrong. My life plans changed so I ended up never moving out to Nashville after I got out; I've rented the home out the entire time I've owned it and am still financed through the VA Loan (with the streamline already complete, so my interest rate is now lower too - within a year of purchase). If you want his contact information, I will happily pass it along. His passion is helping veterans find homes that work for them not only personally, but in their best financial interests.

-Grace

Originally posted by @Grace Thorstad:

Heyward,

I used my VA Loan to purchase my first home in Nashville, TN a full year before I was planning to move there (I was still Active Duty when I purchased and had one more year stationed in California). My broker, Hunter Zinkil from LendUS LLC, is the #6 nationally-ranked VA lender and he knows the rules backwards and forwards. He also has relationships with folks who can answer the mail on situations like yours that may be considered "gray" in what is right and what is wrong. My life plans changed so I ended up never moving out to Nashville after I got out; I've rented the home out the entire time I've owned it and am still financed through the VA Loan (with the streamline already complete, so my interest rate is now lower too - within a year of purchase). If you want his contact information, I will happily pass it along. His passion is helping veterans find homes that work for them not only personally, but in their best financial interests.

-Grace

yes, you were able to do so, because it falls in line with VA Occupancy guidelines.

VA Pamphlet 26-7 states:

"there is a particular future event that will make it possible for the veteran to personally occupy the property as his or her home on a specific future date."

however, it goes on to say "Occupancy at a date beyond 12 months after loan closing generally cannot be considered reasonable by VA."

Originally posted by @Aaron T.:
Originally posted by @Grace Thorstad:

Heyward,

I used my VA Loan to purchase my first home in Nashville, TN a full year before I was planning to move there (I was still Active Duty when I purchased and had one more year stationed in California). My broker, Hunter Zinkil from LendUS LLC, is the #6 nationally-ranked VA lender and he knows the rules backwards and forwards. He also has relationships with folks who can answer the mail on situations like yours that may be considered "gray" in what is right and what is wrong. My life plans changed so I ended up never moving out to Nashville after I got out; I've rented the home out the entire time I've owned it and am still financed through the VA Loan (with the streamline already complete, so my interest rate is now lower too - within a year of purchase). If you want his contact information, I will happily pass it along. His passion is helping veterans find homes that work for them not only personally, but in their best financial interests.

-Grace

yes, you were able to do so, because it falls in line with VA Occupancy guidelines.

VA Pamphlet 26-7 states:

"there is a particular future event that will make it possible for the veteran to personally occupy the property as his or her home on a specific future date."

however, it goes on to say "Occupancy at a date beyond 12 months after loan closing generally cannot be considered reasonable by VA."

Aaron,

Absolutely. What I did was within the bounds of what the loan provides for given that everyone's circumstances change, but there are a lot of folks out there who don't understand that the loan has that flexibility. There were a lot of documents I had to submit to show that I genuinely planned to move into the home within a year of purchase (which I did plan on, at the time), so it's not as if they just "take your word for it" without proof of some sort. My main point to Heyward was that there are many different scenarios the loan can accommodate and a lot of lenders aren't well-versed on those because they just don't know. My lender had to do some extra digging to determine what all we needed to submit for my situation; despite his experience with setting folks up on a VA Loan, my situation was learning curve for him too.

Best,

Grace

@Heyward Lovett

The loan is for active duty and veterans. Maybe I'm wrong, but it sounds like you aren't.

Your family member that is a veteran can use it, but they have to owner occupy the unit for at least 12 months. So if the veteran is in New York they can use it to buy a SFR, duplex, triplex or 4 plex,.....live in it for a year.......The way a number of people have done it is, use the va loan and buy a duplex,.....that way you get a tenant to help pay for the mortgage.....then after at least TWO years hopefully the duplex has appreciated in value by at least 25%. If it has, the lender will let you refi out of that mortgage and use the VA entitlement again.....this time for (most likely) a higher amount because now the veteran has 2 years of "landlording" experience so they will let the veteran count 75% of the Gross Income in addition to their regular W-2 Income and then they buy a triplex or 4 plex.....owner occupy the unit again for 12 months, etc.

Originally posted by @Brian Garlington:

@Heyward Lovett

The loan is for active duty and veterans. Maybe I'm wrong, but it sounds like you aren't.

Your family member that is a veteran can use it, but they have to owner occupy the unit for at least 12 months. So if the veteran is in New York they can use it to buy a SFR, duplex, triplex or 4 plex,.....live in it for a year.......The way a number of people have done it is, use the va loan and buy a duplex,.....that way you get a tenant to help pay for the mortgage.....then after at least TWO years hopefully the duplex has appreciated in value by at least 25%. If it has, the lender will let you refi out of that mortgage and use the VA entitlement again.....this time for (most likely) a higher amount because now the veteran has 2 years of "landlording" experience so they will let the veteran count 75% of the Gross Income in addition to their regular W-2 Income and then they buy a triplex or 4 plex.....owner occupy the unit again for 12 months, etc.

The year is kind of arbitrary, and not an official designation from the VA. If you close on a VA loan, and a week later you get orders and have to move, you would not be liable for the year. The year criteria is where most people that do investing feel its ok to move on. kind of like when you get in a FHA and they give you a year owner occupancy rider on your mortgage.

@Aaron T.    The OP mentioned he has a relative that is a veteran. By nature of that relative being a veteran and not on active duty anymore, his relative won't be getting "orders" to leave within that year,....therefore....the relative needs to be in the property for at least one year. 

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Originally posted by @Brian Garlington:

@Aaron T.    The OP mentioned he has a relative that is a veteran. By nature of that relative being a veteran and not on active duty anymore, his relative won't be getting "orders" to leave within that year,....therefore....the relative needs to be in the property for at least one year. 

understood, but where does it say in the VA guidelines the "one year" occupancy rule? or is this arbritray to what we think is a good time frame to clear our moral conscience?

@Aaron T.

It was certainly on my paperwork that I signed when I used my VA Loan to buy my duplex. Also, look at almost any website that mentions they do VA Loans and it is on there. Have there been some people that are veterans that have "had the intent" to move in to the place using their VA Loan and then something "unexpectedly came up" and they ended up not moving in and they somehow "forgot" to tell their VA Loan lender but they somehow told "remembered to rent out the property within a year"?

Yes there are sleazy, underhanded people that have done that. Have some of these crooks gotten away with it? Sure. I say don't do it.  

Here's a couple of examples of what I've seen happens. First of all the VA Loan people tend to send stuff in the mail to you every few weeks during that first year. Usually not anything you need to "respond to" but courtesy notices and Thank You's, etc. ...

But wait, there's more....

Your name is on a "list" and you will receive mail every few weeks from other lenders that know you have a VA Loan and they are immediately telling you that you can refi out of the VA Loan you just got....that's what happened to me. Once that year is "up" those letters continue coming in the mail. I get them literally every month from different lenders.

I had a conversation with someone a while back who did exactly what people have "implied" about using the VA Loan but not in the way they are supposed to....Here's what happened to her.....

She got the VA Loan.....and suddenly at the last minute decided not to occupy the property....and subsequently decided to rent it out to a relative who she trusted......You know the rest of the story...........Relative and her got into an argument a few months after the "relative" started renting from her......relative decides she isn't going to pay rent until things get settled......THe veteran can't keep floating that mortgage payment,...and the "tenant" knows this.....threatens to tell the VA Lender about the fraud, etc....After all....those "courtesy" notices are being sent to the property to the OWNER with her name and it has the Loan Number, the amount, etc...it was all bad.

Someone else I had a conversation with did the same thing...only he rented to a tenant that he screened.....tenant sees all the VA stuff from the lender and from other banks coming in the mail and tells owner about it.....owner says ignore it. Tenant gets curious and decides to "accidentally" open up one of the pieces of mail.....reads it.....then decides to ask the owner for a break on the rent he's paying since he now knows the mortgage payment....Owner "Balks" tenant says OK.....and next thing you know, all kinds of stuff starts happening related to identity theft on the owner.....and he gets a series of phone calls from the VA Loan people asking questions......

Kharma is Kharma......if you know someone that is thinking about doing something shifty with their VA Loan....tell them not to do it.

 Interestingly,....his "tenant",

Originally posted by @Brian Garlington:

@Aaron T.

It was certainly on my paperwork that I signed when I used my VA Loan to buy my duplex. Also, look at almost any website that mentions they do VA Loans and it is on there. Have there been some people that are veterans that have "had the intent" to move in to the place using their VA Loan and then something "unexpectedly came up" and they ended up not moving in and they somehow "forgot" to tell their VA Loan lender but they somehow told "remembered to rent out the property within a year"?

Yes there are sleazy, underhanded people that have done that. Have some of these crooks gotten away with it? Sure. I say don't do it.  

Here's a couple of examples of what I've seen happens. First of all the VA Loan people tend to send stuff in the mail to you every few weeks during that first year. Usually not anything you need to "respond to" but courtesy notices and Thank You's, etc. ...

But wait, there's more....

Your name is on a "list" and you will receive mail every few weeks from other lenders that know you have a VA Loan and they are immediately telling you that you can refi out of the VA Loan you just got....that's what happened to me. Once that year is "up" those letters continue coming in the mail. I get them literally every month from different lenders.

I had a conversation with someone a while back who did exactly what people have "implied" about using the VA Loan but not in the way they are supposed to....Here's what happened to her.....

She got the VA Loan.....and suddenly at the last minute decided not to occupy the property....and subsequently decided to rent it out to a relative who she trusted......You know the rest of the story...........Relative and her got into an argument a few months after the "relative" started renting from her......relative decides she isn't going to pay rent until things get settled......THe veteran can't keep floating that mortgage payment,...and the "tenant" knows this.....threatens to tell the VA Lender about the fraud, etc....After all....those "courtesy" notices are being sent to the property to the OWNER with her name and it has the Loan Number, the amount, etc...it was all bad.

Someone else I had a conversation with did the same thing...only he rented to a tenant that he screened.....tenant sees all the VA stuff from the lender and from other banks coming in the mail and tells owner about it.....owner says ignore it. Tenant gets curious and decides to "accidentally" open up one of the pieces of mail.....reads it.....then decides to ask the owner for a break on the rent he's paying since he now knows the mortgage payment....Owner "Balks" tenant says OK.....and next thing you know, all kinds of stuff starts happening related to identity theft on the owner.....and he gets a series of phone calls from the VA Loan people asking questions......

Kharma is Kharma......if you know someone that is thinking about doing something shifty with their VA Loan....tell them not to do it.

 Interestingly,....his "tenant",

 your paperwork said you only have to occupy for one year and then you are free to rent it?