Between 2014 and 2021, we bought four multi-family properties in the Seattle area. Total out-of-pocket across all four was only $33,000. This was possible because of my husband’s VA loan benefit… and a partial entitlement loophole our mortgage broker never mentioned.
If you, your partner, or child served in the military and you’re thinking about buying a multi-family property, this post is for you.
What is a VA loan?
A VA loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs, available to eligible veterans, active-duty service members, and surviving spouses. Key benefits include:
- No down payment required
- No PMI — unlike conventional loans, no monthly mortgage insurance when putting less than 20% down
- Competitive interest rates — government-backed means less lender risk
- Works on multifamily properties — up to 4 units, as long as you occupy one as your primary residence
That last point is the one most people miss. We used it to buy triplexes.
The trade-off is a one-time VA funding fee. When we used it a second time at Union Hill, the fee was ~$10,000 — far less than a 20% down payment on a $300,000 property ($60,000). Veterans with a service-connected disability rating may have this fee waived entirely.
How VA loan multifamily house hacking works
You must live in the property as your primary residence; you cannot use a VA loan if you plan to rent all the apartments. But buying a multifamily and renting the other units while you occupy one is allowed. Your tenants help cover your mortgage while you build equity, with zero down.
This is what we did with our Central District triplex in 2014. We took the middle unit, rented the upper unit to a long-term tenant, and converted the lower apartment to an Airbnb. The rental income covered our mortgage and utilities, and we were able to put away funds each month for vacancy and maintenance. Full story here.
How we used the benefit across four properties
Property 1 — Central District triplex (2014)
VA loan. No down payment.
Property 2 — Delridge duplex (2015)
Saved $33,000, used a conventional loan with PMI. Refinanced out of PMI once we hit 80% LTV. Purchase price: $437,500. More here. We could save that quickly only because the VA loan eliminated our housing costs on Property 1.
Property 3 — Union Hill triplex, Bremerton (2017)
We refinanced Central District into a conventional loan, freeing up our VA entitlement (you can only do this once). We then used the VA loan again on Union Hill — 100% of budget went to renovations. Funding fee: ~$10,000. Full story here.
Property 4 — Cherry Hill duplex (2021)
This is where it gets interesting!
The partial entitlement loophole our broker missed
After using the one-time restoration on Union Hill, our broker said we couldn’t use the VA loan again. But I did my own research and found he was wrong.
Partial entitlement — also called second-tier or bonus entitlement — works like this: when you use a VA loan, you may not use your entire entitlement. If the amount required to guarantee your loan was less than your total entitlement, the remainder is still available for a future purchase. You may need a down payment to bridge the gap, but it will likely be less than 20%.
Cherry Hill was $1,325,000. A 20% conventional down payment would have been $265,000. Using our remaining Delridge entitlement, we got that under $200,000. We covered the down payment with a HELOC on Central District. Then when we moved into Cherry Hill, the rent from our old apartment covered the HELOC payments. Net out of pocket: zero.
Before assuming you’ve exhausted your benefit, check your Certificate of Eligibility (COE). Your broker may not know about remaining entitlement from a prior loan if they weren’t the broker or servicer. This saved us over $65,000. You can request your COE through the VA’s official website.
What to know before you start
Occupancy is required.You need to move in within 60 days and live there at least a year. But you can rent the other units immediately. We lived in Bremerton to satisfy the requirement, then moved back to Seattle.
VA appraisals are stricter. Every unit gets reviewed for habitability. If the building needs significant work, the VA loan may not be the right tool.
Get your COE early. It shows exactly how much entitlement you have and how much is remaining if you’ve used the benefit before.
Use a VA-specialist lender. Our broker didn’t know about partial entitlement. Make sure you ask about this before putting 20% down!
A note on timing. We refinanced all four properties in 2021 at historically low rates — between 2.5% and 3.875% (higher on the rentals, as is typical). In a higher-rate environment the math changes, but the strategy doesn’t.
The full picture
We bought four properties with only $33,000 out of pocket… this is less than some people pay for a car! The $33,000 went entirely to the Delridge purchase, which was the one property where we didn’t use the VA loan. Every other purchase was zero down or covered by a HELOC with rental income offsetting the payments.
Most veterans know about zero-down for single-family homes. Far fewer know you can use it on a triplex, restore it and use it again, or tap remaining entitlement even after you think it’s gone.
Drop questions in the comments. And if you’re active duty or a veteran that has used your VA loan, make sure you know if you’ve used all your entitlement.
Related posts:
How we house-hacked our first multi-family property
Buying a triplex in a gentrifying market
Unforeseen rental expenses for unsexy things