Can You Use a USDA Loan for Investment Property?
If you're hoping to break into real estate investing with a USDA loan, you might wonder, “Can I use a USDA loan for investment property?” The short answer is no, but the full story is a bit more nuanced.
USDA loans are designed to help low and moderate-income homebuyers afford safe, sanitary housing in rural and suburban areas. Because of this goal, USDA loans have specific occupancy and property use requirements that generally rule out investment properties, including rentals and vacation homes.
However, that doesn’t mean you're out of options. This guide will explore why USDA loans don’t allow investment properties, what is allowed under USDA rules, and which loan types might better suit your investment goals, including short-term rentals like Airbnb.
The U.S. Department of Agriculture backs the USDA loan program, and it was created to encourage homeownership in eligible rural areas. To keep the program affordable and accessible, USDA loans come with several restrictions, including:
In other words, you cannot use a USDA loan for investment properties like a second home, vacation rental, or traditional rental property. The loan is strictly for people intending to live in the home full-time.
That depends. Though purchasing land with the primary purpose of income would violate USDA regulations, buyers may still purchase land with income-producing features located on it. This would include things like barns, silos, livestock facilities and greenhouse, as long as they are not part of a commercial or income-producing operation. A barn used for storage or a greenhouse used to grow personal produce would be allowable under USDA rules.
Although you can’t buy an investment property with a USDA loan, some scenarios offer more flexibility than you might think:
You can buy a home with a USDA loan, live in it as your primary residence, make improvements, and later sell it. As long as you meet the occupancy requirement (usually one year), this strategy — known as a live-in flip — is permissible.
Running a small business from your USDA-financed home is allowed, as long as the business doesn’t require structural changes or significantly affect the residential character of the property. Examples include freelance writing, online shops, or home offices.
Buying land with barns, silos, or greenhouses may be allowed only if those structures are for personal use rather than income. For example, a greenhouse used to grow food for your household is fine; one used to grow crops for sale is not.
To ensure the program supports homeownership rather than real estate speculation, USDA loans come with strict occupancy rules:
After that period, some borrowers explore other uses, such as renting out the home. We'll cover how that works below.
If your goal is to own an investment property, you may want to explore these alternatives:
| Feature | USDA Loan | USDA Loan | Conventional Loan |
|---|---|---|---|
| Use for Investment Property | Not Allowed | Yes | Allowed |
| Occupancy Requirement | Must be primary residence | Must be owner-occupied initially | Not required |
| Down Payment | 0% | 3.50% | 3%, but may require higher (15–25%) for investment properties |
| Credit Score Requirements | 640+ (recommended) | 580+ | 620+ |
| Income Limits | Yes | No | No |
Yes, but only after fulfilling the initial occupancy requirement. USDA guidelines expect the borrower to live in the home for at least 12 months after purchase.
Once that period ends, you may be able to rent the property out, especially if you’re relocating due to a job or family need. However, this transition must be organic, not pre-planned, as using a USDA loan with the intention of renting out the home would be considered mortgage fraud.
This is a gray area. If you're living in the home full-time and renting out a spare room occasionally, that may be allowed, depending on your lender’s interpretation and local zoning laws. However:
In short, your USDA-financed home must remain your primary residence, so full-time short-term rental use is not allowed.
If you’re looking to invest in real estate – whether for long-term rentals, Airbnb, or flipping – a USDA loan probably won’t be your best option. Instead, consider these alternatives:
These are ideal for experienced investors with good credit and a sizable down payment.
FHA loans are great for new investors looking to house-hack a multi-unit property while living in one unit.
Tailored for investors, qualification is based on property cash flow rather than personal income.
These are available—but only to government agencies, nonprofits, and eligible businesses, not individual buyers.
The USDA does offer a Multi-Family Housing Direct Loan program, but it's not for everyday homebuyers. These loans are designed to support affordable rental housing in rural areas and are reserved for:
Properties must have 5+ units, and rent must remain affordable (based on area median income). This program is great for expanding affordable housing, but not as a tool for individual real estate investors.
Yes, but only after living in it as your primary residence for 12 months.
You must live in the property for at least one year before renting it out, in accordance with USDA occupancy rules.
Yes, you can use a USDA loan to purchase a duplex, but you must live there as your primary residence. You cannot rent the property out to make income.
Yes, if your circumstances change. Just make sure you’ve met the initial occupancy requirement and do not use rental income to qualify at the time of loan approval.
While you can’t use a USDA loan for a rental or investment property directly, it still offers an incredible opportunity for homebuyers, especially those with limited savings and modest income or first-time homebuyers. If your goal is to build long-term wealth through real estate, understanding when and how to use the USDA loan strategically – and when to pivot to other financing options – can set you up for success.
Whether you're house hacking with an FHA loan or leveraging a conventional mortgage for an Airbnb, there’s a path forward. Just be sure your financing aligns with your investment goals and the rules of your chosen loan.
Find out more about your USDA loan eligibility today!
