Should I use my VA loan on an "Investment Property"?

SPC(P) Private RallyPoint Member — Mon, 29 Feb 2016 22:41:38 -0500

I quoted Investment Property because this won't be a buy and flip. Where as, I buy, work on, rent out rooms and sell in 5 years. Should I use the VA loan on this or save for my "dream home"

Response by LTC John Shaw made Feb 29 at 2016 10:45 PM

LTC John Shaw — Mon, 29 Feb 2016 22:45:14 -0500

I would only use VA on primary residence and that statement is required to secure the loan.

Response by LTC Yinon Weiss made Mar 1 at 2016 1:26 AM

LTC Yinon Weiss — Tue, 01 Mar 2016 01:26:18 -0500

If you plan to be there for 5 years, that's a lot longer than many people even stay in their "permanent" home, so for all intensive purposes, it is primary and only residence. Why wouldn't you use a VA loan? You can use the VA loan again after you sell the house, or you can refinance to a conventional loan at that point an use the VA loan again. You can use the VA loan more than one time, you just can't have two open at the same time, as I recall it.

Response by Capt Private RallyPoint Member made Mar 1 at 2016 12:13 PM

Capt Private RallyPoint Member — Tue, 01 Mar 2016 12:13:56 -0500

You're only required to keep the home as your primary residence for 2 years under the terms of a VA loan. Use it.

Response by MAJ Private RallyPoint Member made Mar 1 at 2016 12:49 PM

MAJ Private RallyPoint Member — Tue, 01 Mar 2016 12:49:37 -0500

Look at both the VA and a conventional loan, the interest rate and PMI are the major concerns a HUD loan has a crazy expensive PMI cost that isn't disclosed up front. The VA funding fee is expensive if you are not service disabled, but the lower interest rate normally gives you a payback period of about four years. 10 years certainly is a long time for a loan. After looking at both you can do a Cost Benefit Analysis and find out which one is the best loan for your situation.

If you decide to move, refinance the home before you move out as investment properties typically require 25% equity of the original cost of the loan to refinance. So refinance just before you leave to a conventional loan then you can use the VA loan on your new home. Also the current tax rules require a capital gains tax on any rental property that you sell. About 25% of the profit on the home goes to taxes, if you have lived in the home for 2 out of the last 5 years (estimated years may be 3) there is no tax on the profit, so it may be better to just sell the home when you depart. Best of luck and congrats on the purchase.