The ins and outs of VA loans

[Leah Lindon]

Hello BP community, thank you in advance for reading this post and thank you for all of the excellent tips and advice that I have received thus far by reading all of the post here on BiggerPockets! My question is around VA loans. I am a newbie investor looking to get started and I have a military family member who would like to assist me with funding some deals. He has access to VA loans but I don't quite understand how they work, and how we can use them to purchase investment properties. We are located in North Carolina and any help or advice that you can offer would be greatly greatly appreciated!

[Megan Greathouse]

Hi, Leah. My husband and I are both former Marines, so we had VA loans to use on our two properties. There are some great benefits to VA loans, the biggest of which is no money down required! However, you have to keep in mind that VA loans are only for owner-occupants, so your limited in how you can put them to work for investments. Your family member could either buy a single-family home to live in for a couple of years and then start renting it out later... or potentially buy a multi-family home and live in one unit while you rehab and rent out the remaining units. (You'll have to double check whether VA loans can be used on multi-family property, but I'm pretty sure they can be). So the bottom line is that you'll probably have to look at this assistance as a pretty long-term thing, and your military family member would have to be willing to live in the property to use the VA loan. Once he/she has used the VA loan, they can't use it again unless they sell that property and buy another one that they plan to occupy themselves.

Here's how my husband and I did it... we bought our first home in 2012 using my husband's VA loan and lived there for two years. When we were ready to move a little closer to our jobs, we retained that SFH as a rental. Our COC return is great because we barely had to put any money down (though we chose to put a little down to keep the monthly mortgage payment under a certain level). We were then able to use my VA loan to buy our current home with no money down.

If we were willing to keep moving, we could sell one of those properties and use the VA loan to buy another home (potentially even a multi-family) to live in and eventually rent out... but we have a small child and don't plan to keep moving every couple of years. So we've already maxed out our ability to put the VA loans to use. However, it was really beneficial in helping us get started, and has allowed us to save more money for other investments.

Hope that helps a little. Feel free to reach out if you want to chat more about this.