making my primary residence to a rental property

Member since 2023 · 17 posts · 9 votes

HI, we purchase our primary house in April 2022 and we are thinking of moving to a new house sometime next year. my questions are the ff: thank you in advance for the advice. we are really want to learn about rentals and hoping this would be our start.

1.) do we have to wait for 2 years to have it legally rented?

2.) do we have to report it to our mortgage loan company and will it affect our interest rate?

3.) do I have to have LLC to start renting it out or is there a possibility to transfer it to LLC?

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John Mocker

Insurance Agent · Norwalk, CT · Member since 2016 · 2k+ posts · 1k+ votes

Leo,

Generally, your Homeowners Insurance will need to be changed to a Dwelling Fire (aka Landlord) policy. If you do change the ownership out of your name, you need to make sure the policy is in the name of the owner of the property (ie. LLC, trust, etc.).

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Randy Rodenhouse
Investor · Charleston, SC · Member since 2011 · 606 posts · 413 votes
3y
What do you say 2 years? I am not sure what type of loan you got when you purchased the house but typically there is a 1 year period that you have to live in the property but depends on the loan. I have purchased many homes that I later rented and I never said anything to lender. You do need to get a landlord policy for insurance. You can rent it in your own name or under an LLC. You would have to transfer the property to an LLC first which could throw up the due on sale red flag if not done correctly but very low probability of that happening.
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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
3y
What kind of loan do you have? If it requires you to live in the house for 2 years, then yes you will be committing mortgage fraud if you do otherwise.
If there's no requirement to live in the home for a minimum length of time, no you generally don't have to report it to anyone, just keep making your payments. You don't need an LLC and in fact probably can't get this into an LLC without causing yourself grief if you're just starting out.
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Leo MartinezPro Member
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Member since 2023 · 17 posts · 9 votes
3y
I have conventional loan. how do I protect the property in case tenant sue me (knock on wood), is there a specific insurance to protect my asset? and how do I report it to IRS? @JD Martin and Randy Rodenhouse thank you guys for your help.

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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
3y
Quote from @Leo Martinez:

HI, we purchase our primary house in April 2022 and we are thinking of moving to a new house sometime next year. my questions are the ff: thank you in advance for the advice. we are really want to learn about rentals and hoping this would be our start.
1.) do we have to wait for 2 years to have it legally rented?
2.) do we have to report it to our mortgage loan company and will it affect our interest rate?
3.) do I have to have LLC to start renting it out or is there a possibility to transfer it to LLC?

1) Most are 1, but read your papers.
2) No(likely)

3) You can quitclaim to an LLC, then insure it under the LLC name. If you're still living in it better off transferring warranty deed to a Trust, then have this trust own the LLC. After you move out, move it to the LLC.
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John Mocker
Insurance Agent · Norwalk, CT · Member since 2016 · 2k+ posts · 1k+ votes
3y
Leo,
Generally, your Homeowners Insurance will need to be changed to a Dwelling Fire (aka Landlord) policy. If you do change the ownership out of your name, you need to make sure the policy is in the name of the owner of the property (ie. LLC, trust, etc.).
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Leo MartinezPro Member
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Member since 2023 · 17 posts · 9 votes
3y
Quote from @John Mocker:

Leo,
Generally, your Homeowners Insurance will need to be changed to a Dwelling Fire (aka Landlord) policy. If you do change the ownership out of your name, you need to make sure the policy is in the name of the owner of the property (ie. LLC, trust, etc.).

got it. thanks. I really appreciate your help. god bless you
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Colleen F.Pro Member
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
3y
@Leo Martinez if have an owner occupant mortgage look at your paperwork there may be no restriction. You may be thinking of if you plan to sell then you have to live in it two of the last 5 years to get an exclusion on capitol gains tax. Your interest rate won't be affected. You have to change your homeowners insurance. LLC is a personal choice, some people say just get good liability insurance.
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Jacob Brown
Investor · WI · Member since 2023 · 6 posts · 3 votes
3y
Hey Leo!

You dont have to wait 2 years, it shouldn't affect interest rates, I would advice using an LLC for protection purposes if a tenant tries to sue, you don't want them coming for your assets!

Do you know what your projected revenue would be for the home as a STR vs a LTR?
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Leo MartinezPro Member
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Member since 2023 · 17 posts · 9 votes
3y
@Jacob Brown can I still put my property under LLC even if I purchased it as a primary residence? for STR the location is not really ideal, its located close to industrial area and there is no close tourist destination. LTR would be my best bet
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Leo MartinezPro Member
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Member since 2023 · 17 posts · 9 votes
3y
Quote from @Colleen F.:

@Leo Martinez if have an owner occupant mortgage look at your paperwork there may be no restriction. You may be thinking of if you plan to sell then you have to live in it two of the last 5 years to get an exclusion on capitol gains tax. Your interest rate won't be affected. You have to change your homeowners insurance. LLC is a personal choice, some people say just get good liability insurance.
noted. thanks. I really appreciate it. have a blessed day
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Jacob Brown
Investor · WI · Member since 2023 · 6 posts · 3 votes
3y
Quote from @Leo Martinez:

@Jacob Brown can I still put my property under LLC even if I purchased it as a primary residence? for STR the location is not really ideal, its located close to industrial area and there is no close tourist destination. LTR would be my best bet
You can definitely put the primary residence under an LLC, there are just different tax laws with it though. As far as that goes, I'd honestly just contact an attorney to help you with the paperwork and the transition so you can understand the ins and outs as you set it up. Have a great day brother, God bless!
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Leo MartinezPro Member
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Member since 2023 · 17 posts · 9 votes
3y
Quote from @Jacob Brown:

Quote from @Leo Martinez:

@Jacob Brown can I still put my property under LLC even if I purchased it as a primary residence? for STR the location is not really ideal, its located close to industrial area and there is no close tourist destination. LTR would be my best bet
You can definitely put the primary residence under an LLC, there are just different tax laws with it though. As far as that goes, I'd honestly just contact an attorney to help you with the paperwork and the transition so you can understand the ins and outs as you set it up. Have a great day brother, God bless!

noted. thank you... have a blesse day.
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