You found the perfect home, purchased it with a VA loan backed by the U.S. Department of Veterans Affairs (VA), and have been living there happily ever since. Now, you’ve received Permanent Change of Station orders and need to relocate. Do you have to sell your dream home? Selling is an option, but it’s not your only one. After exploring the pros and cons of being a landlord, you may decide to try renting the property out.
What About the VA’s Occupancy Rules?
It’s true. The VA is very clear about the fact that a borrower can only use a VA loan to purchase a primary residence. However, that doesn’t completely rule out the possibility of using the property as an investment, according to Rich on Money. After all, there is no reason that you cannot rent out a section of the property that you are not using.
If you’re ready to become a landlord immediately, you could opt to purchase a property with multiple units. You would have to live in one to satisfy the terms of a VA loan, but you would be able to rent out the others. Plus, the VA understands that frequent moves are often a fact of military life. Although you must intend to live in a home when you buy it, you aren’t required to stay there forever. After residing in a home for a while, you can move to another location and rent out your prior residence. In fact, if you have enough entitlement, you may be able to use another VA loan to purchase your next house while you’re still paying off your first one.
The Pros and Cons of Being a Landlord
Whether you’ve found a home that you hope to return to when your tour is over, don’t want to sell at a loss in a challenging housing market, or simply like the idea of owning an investment property, it’s important to consider both the pros and cons of being a landlord before you make the leap.
The Pros of Being a Landlord
What makes people take the plunge? As SMB CEO points out, there are several positives that make being a landlord a smart decision:
- It provides income. A rental property brings recurring revenue.
- It lets you retain ownership of a desirable property. This is especially true if the monthly rent is more than your monthly mortgage payment.
- It allows you to own your own business and run it your way. However, you do have to educate yourself about all applicable laws and follow their dictates.
- It provides tax deductions. At tax time, landlords can deduct many of their business expenses.
- It isn’t a big time commitment. While there will be periods when the job requires more attention, the time demands of being a landlord are generally minimal.
- Property is a long-term investment. Properties, including rental units, typically appreciate over time.
The Cons of Being a Landlord
Owning rental properties can also have a few pitfalls. As Landlordology indicates, there are some potential downsides to being a landlord:
- Dealing with renters can be challenging. Issues with dishonesty, trouble collecting rent money, or problems with property damage can create significant hassles.
- You must stay current on all relevant legal issues. If you don’t, you risk exposing yourself to lawsuits.
- Renting leads to additional costs. As a business owner, you’ll incur business expenses for things like legal advice, accounting services, and property maintenance. You’ll also need to be prepared financially to weather any time when the property is vacant.
- Rental properties experience more wear and tear. While maintenance is a must for any property, renters are often rougher on their living quarters than homeowners, so you’re likely to have additional maintenance costs.
- Rental properties can be more complicated to sell. Having a tenant can discourage buyers and increase the amount of time it takes to sell a property.
- Being a landlord can be stressful. When things go wrong or the property is vacant for an extended period, it can be mentally, emotionally, and financially stressful.
With competitive interest rates, no requirement for a down payment or private mortgage insurance, relaxed credit standards, and limits on closing costs, VA loans can present a fantastic opportunity to eligible borrowers. However, the VA loan program does have its quirks, so if you want to get the maximum benefit, you’ll want to work with a trusted lender who has experience with these government-backed loans. At PrimeLending: Manhattan, Kansas, we’re well versed in the ins and outs of VA loans. If you’re a veteran or service member who is interested in getting the most out of your housing benefits, contact us today.