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Veterans are supported by the government when it comes to housing. Among the few financing options, VA loans are considered the best option because they’re designed for people who came from military service and are on active duty. For those interested in real estate businesses, such as house flipping, it’s possible to use VA loans to fund the project. Read on to learn more about flipping a home with a VA loan.
VA Loan Benefits
Some may not know that VA loans can be used for a house flipping project under certain conditions. The loan has benefits that make it ideal for veterans and military active-duty personnel who are interested in flipping properties. You can inquire about VA loan requirements from reputable mortgage lenders similar to Security America Mortgage. Acquiring a VA loan can open opportunities for house flipping.
The following are the benefits of VA loans:
- It requires no down payment. Eligible borrowers aren’t required to put down a specific amount as a down payment.
- There’s no waiting period. On the same day you buy a home, you’re allowed to sell it to another veteran who will pay through a VA loan.
- The Interest Rate is low. VA loan lenders, through the Department of Veterans Affairs mandate, are keeping interest rates low.
VA House Flipping Guidelines
Veterans Affairs will only allow properties to be fixed and sold by the owner or the investor as long as it’s in title in 90 days. That means the home has to stay in the owner’s name no less than 90 days before they’re allowed to sell it. The lender is also responsible for the property, as it must suffice as collateral against the mortgage.
If you own the property from 91 to 180 days, the lender has the right to lay down additional requirements. If the profit from the sale of the property is more than 20% of the home price, the lender will require an appraisal for the second time to ensure the property’s actual value. The seller is responsible for this appraisal.
To be clear, you’re not technically allowed to use the VA loan for rehabilitating investment or rental properties. You can, however, invest using a VA loan in three different ways. For more details on VA loan requirements, you can head to securityamericamortgage.com.
Ways Of Using VA Loans For House Flipping
1. Long-Term Flipping
Traditional house flipping allows the buyer to own a property that they could rehabilitate and put up for sale in a few months. Lenders will refuse your application if you plan to use the money directly for this purpose.
But if you’re going for a long-term flip, you can use a VA loan to buy an upper-fixer or one that needs upgrading. You’ll need to live in it while making gradual changes. You can sell the house once you’re ready to leave your duty station.
The only advantage is that it may take a few years, which is why it’s long-term. But with that, you’ll have more chances to build home equity. At the same time, you’ll have more time to find buyers who might be interested in your home.
2. Flipping To Gain Experience
Some of those transitioning from active duty and back to civilian life might be looking at house flipping or real estate investing as a source of income. The first year of occupancy is likely not an issue for them because they can use that period to learn and gain house flipping experience.
At least a year is needed for veterans and active-duty personnel to meet the occupancy requirements and thoroughly research and gain knowledge on property flipping. It takes more time than watching television series on the project because of the various procedures it involves.
With house flipping, you need to learn how to deal with building budgets, transacting with contractors, and ensuring that the rehabilitation is managed according to the set timeline. It takes skill to accomplish such a project, and the experience you gain is invaluable.
Once you learn flipping and its twists and turns, you’ll have more confidence and knowledge of financing options to handle other significant projects. The VA loan allows beginners to expand their skill set and expertise through this option.
3. Gain Financing Benefits
Home rehabilitation can take roughly six months, but some investors will take longer on purpose. Qualified VA loan borrowers aim to wait for financing benefits that a VA loan might offer. In the case of active-duty military personnel juggling time between service duties and house flipping, completing the rehab project might not be possible. VA loans have become another financing option because of this reality.
Some investors also might want to buy multi-unit commercial properties that require commercial lending with a down payment. Investors who want to gather that much seed capital will need more time to complete up to three successful flips. Each project can potentially take longer, and financing becomes possible with a few VA loans throughout the years.
VA loans can’t be used on rental properties. But veterans and service members can still use the VA loan to work in their own residential homes. It will allow them to make necessary changes and build equity at the same time before actually selling it. Moreover, it gives them time and a learning experience if they want to use house flipping as another source of income once they retire from military service.