Mixed-Use Properties: We all know that VA loans can offer tremendous benefits to servicemembers and veterans. The ability to purchase residential properties with no down payment has made homeownership possible for millions. With all of these benefits, it’s essential to get informed of how you can use a VA Loan. So, what about commercial properties? You may not be able to use a VA loan for sole commercial properties or businesses, but what you can do – is use it for what’s called a “Mixed-Use Property”.
What Is a Mixed-Use Property?
By definition, the mixed-use property is zoned by a town, city, village, etc for both commercial and residential use. Properties that are considered mixed-use can legally offer space for commercial businesses and residential living space. This option can be regarded as a considerable advantage for veteran real estate investors.
How Can I Use a VA Loan for Mixed-Use Properties?
There are a couple of ways that you can use the VA loan for mixed use properties. A borrower can find a property that is presently used for both a business with a living space (usually upstairs) or – borrowers may be able to find a property that can easily convert to a mixed-use space. (Remember, the property MUST be zoned for both commercial and residential to do this).
It’s also important to remember that these spaces must also meet the VA’s minimum property requirements, even with mixed use properties. These requirements ensure that the property is a livable and a safe investment for veteran borrowers. You can also find more information about these requirements in Chapter 11, Topic 10 of the VA Lenders’ Handbook.
Additional Mixed-Use Property Requirements
1. To use a VA loan for a mixed-use property, the commercial space cannot be more than 25% of the total square footage. This amount may not seem like a lot, but the VA has to make sure that the borrower has enough residential space.
2. As you may have heard, VA loans can be used to purchase multifamily properties up to 4 units. Because of this, mixed-use properties must also follow this rule and have no more than four units on the property.
3. Remaining Economic Life – For mixed-use properties, the VA will require the property to have a remaining economic life of at least 30 years. Because the VA loan is intended to be used for residential purchases, lenders must require that it remains residential for a period of time. The VA will also make sure that the commercialization of the property is good enough to provide lending—borrowers will have to prove that a business will flourish and not flop to get approved for a loan for multi-use property.
Refinancing Options of Mixed-Use Properties
Just like with residential properties, VA borrowers have the option to refinance mixed use properties.
VA IRRRL (Streamline Refinance)
Interest Rate Reduction Refinance Loans can help borrowers save money by potentially reducing their interest rate on the loan. IRRRLs do not require credit checks or appraisals, but it’s essential to verify with a lending expert that this is the best option and direction for you and your finances
VA Cash-Out Refinance
Though a little more complicated than a VA IRRRL, a VA cash-out refinance can be done on a mixed-use property. An appraisal is required, and minimum property requirements will have to be met to ensure that the property and building are still viable for investment.
Final Considerations
Many veterans and active-duty members question whether or not it’s possible to invest with a VA Loan. With options such as mixed-use properties that can allow you to run a small business and live on-site, it can be an excellent investment. However, it is important to consider all of the requirements and aspects of multi-use properties to ensure that it is a suitable investment for you.
If you’re looking for assistance with purchasing a mixed-use property with a VA Loan, ADPI’s in-house lending team can help! Our AmNet branch provides lending experts that will guide you through the entire VA loan process. You can find a lender (or even a real estate agent) through our website. We are excited to help you with your future investment!
