I used my VA loan to purchase a property that generates passive income

  • As an Air Force veteran, I have access to VA loans that don’t require a down payment.
  • I have used the VA loan twice to buy houses for myself. When I moved, I converted my first apartment into a rental apartment.
  • I hope that one day I can use the VA loan to buy an apartment building to live in and rent out.

I’ve spent a lot of time researching the benefits that are given to service members. As a naturally thrifty person, joining the Air Force has opened up a multitude of tools for my financial success. These included the post-9/11 GI Bill, a high-yield savings account, and health insurance provided by VA. But one of the biggest benefits I experienced was the VA loan, which I used on multiple occasions.

Most members of the military have heard of the VA loan. These federally insured loans allow eligible service members to pay 0% on a home loan without having to pay mortgage insurance premiums.

And although interest rates on these loans tend to be slightly higher than standard mortgages, a low credit requirement and no down payment have helped make home ownership affordable for many.

You can get more than one VA loan

Perhaps the best part of VA loan eligibility is that unlike many other benefits granted to service members, your eligibility does not end with your services. This means veterans can enjoy the same loan options as their active-duty counterparts — and the loan can be used multiple times.

Now, when I say multiple times, I don’t mean you can get a loan, pay it off, and then get another VA loan. There’s a fairly common misconception that you can only hold one VA loan at a time, but the truth is that you have a certain amount of money to borrow against. If your first home does not exceed this amount? You can take out another loan.

That doesn’t mean you can just go out and buy every property you see. Most of the time, you need to have a good reason for buying another home.

A lot of this has to do with the fact that any home you buy with a VA loan is meant to be a primary residence. So if you already have a home but want a second one just 50 miles away, the banks will likely consider this a vacation home and not approve you for another loan.

I have used my VA loan claim twice so far

In my case, I first bought a property in August 2017 after accepting a job offer in Washington, DC. A few years later I went back to school, changed jobs and decided to move back to California. Because I hadn’t used up my entire entitlement—and because I was making a big move across the country—I was able to qualify for a second VA loan.

The way the VA loan entitlement is calculated is a little tricky, and the government’s own websites aren’t particularly intuitive. Basically, however, eligible service members receive two tiers of loan entitlements.

The base tier includes $36,000 in VA support. Since the VA is only guaranteeing 25% of your loan at any given time, this essentially gives you $144,000 in purchasing power.

However, a second level of entitlement of $125,800 is available to members (meaning you can borrow up to four times that amount). Add these two together and you get a purchasing power of $647,200. (Note that these loan limits only apply if you are looking for a second VA loan. You don’t have a loan limit on your first VA loan.)

My first condo was $330,000 and my second was $400,000. Since the total of these two loans was over $647,200, I had to put down a down payment on my second property, but if you don’t use the full entitlement, you still only need a 0% down payment.

I applied for my second VA loan in June 2019 and was approved. Luckily I was able to rent it out without any problems as it had been more than a year since I bought my original property.

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I am earning passive income from my first property

These days I call California home again (at least when I’m not traveling). Together, my two VA loans have been a great blessing. Not only am I able to earn additional income from my original condo, but I save myself hundreds of dollars each month by skipping mortgage insurance on my second property.

Although I’m no longer in the Air Force, I will always be grateful for the opportunities it gives me. my next destination? Selling my one-unit condo and moving into a four-unit condo with, you guessed it, my VA loan.

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