In various forms, the Veterans Administration loan has been around for decades, helping military personnel launch new lives4 after leaving active duty. These loans allow veterans to go back to school, start new lives and buy homes – assistance that benefits not only individual lives, but also the economy at large. Now, a little known loophole in VA home loan rules can also help veterans to become investors.
VA loans are typically intended to help veterans resume civilian life after leaving military service, or as a perk of service even when used years down the line. These loans can pay for tuition,or buy a home. Terms are generous: VA loans generally have low interest rates – and require zero down payments.
The official position from the Veterans Administration is that VA home loans are intended for residential property only, not for property that the borrower doesn’t use as a primary residence – whether or not such a property generates an income.
But for veterans hoping to get started building wealth in income property as Jason Hartman advises, there’s a way around that restriction. According to a recent post on Veterans United Network, a support site for veterans of all branches of the service, a VA home loan can be used to buy a certain kind of property – the small multiplex.
The latest VA home loan rules do state that the loans are to be used for residential property, not investments – but they define “residential property” as one that can consist of up to four family units – and one business.
That definition of residential property means that qualified veterans can get a VA loan –with nothing down — to buy a multiples of up to four unites as long as one of the units becomes a primary residence. The property could even include a business, as long as the borrower commits to living on one of the units while renting the others out.
As an added boost, Veterans United Network reports that a veteran who intends to buy a multiplex with two to four unites can use up to 75 percent of the rental income from all units besides the primary residence to prequalify for the loan Plus, owning the property qualifies the borrower for the usual tax deductions available to investors, including mortgage interest.
Of course, being a landlord in residence can pose its own problems – and living in a small unit in a multiplex may not be for everyone. But for former service men and women hoping to launch a career in rental property investing, using a VA loan in this way may be the first step toward creating wealth that lasts a lifetime. (Top image:Flickr/USArmyMaterielCommand)
Miller, Peter G. “How
to Use a VA Loan to Purchase Investment Property.”: Veterans United Network. VeteransUnited.com. 19 June 2012
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