Can I Use a VA Loan for a Rental Property

By Kristine Tucker

A United States Department of Veterans Affairs (VA) loan allows a veteran to purchase a rental real estate property without a down payment. A veteran uses a VA-funded loan to purchase a rental property as long as specific guidelines are followed. As of 2011, the maximum VA loan amount is $417,000 unless the property is located in a high cost of living area and the maximum loan amount is extended to include jumbo loans.

If a veteran's income and credit history enable him to purchase a VA-funded rental property, the department of Veterans Affairs requires that the veteran's permanent residence be located on that property. Regardless of whether the rental property is a single residence, a duplex or a multi-unit complex, the veteran must reside on that property.

A veteran cannot purchase a VA-funded rental property that has more than four units unless another veteran also is purchasing the property. The guidelines state that if more than one veteran is buying, one additional residential family unit may be added to the original four for each participating veteran. Thus, two veterans can purchase up to six units, three veterans up to seven units and so forth.

If a veteran is dependent upon VA-funded rental income in order to qualify for a VA loan, she must prove that she has previous experience working as a landlord. U.S. Military VA Loan states that a veteran must show that "he or she has the background or qualifications to be successful as a landlord." Generally, a loan officer or loan underwriter determines whether the applicant meets those guidelines.

If a veteran needs the rental income to qualify for the VA-funded loan, the applicant must have enough cash reserves to afford payments on the loan for at least six months. Those payments are met without any financial aid from the rental income. Savings account balances, inheritances, retirement funds and investment income are used to provide available cash reserves.

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