Turn primary residence into first rental

6 Replies

I have lived in my 3/2 1600sf house for almost 6 yrs. I refinanced over a year ago and my monthly payments are approx. $450 a month plus about $3500 in yearly taxes and HOA dues (it is in the Houston NW suburbs). It could rent for about $1200-$1350 a month.

I purchased the house to eventually rent out as it is a great size and in a great location. I'm curious as my refinance was with my Credit Union, and the loan has since been purchased by Fannie Mae (owner) w/ the Credit Union managing it, per a letter I received. Can I rent the house as it'll no longer be my primary res.??? I reviewed the contract and have fulfilled the 1yr requirement. Is it common for contracts to have a clause while there's a loan it must remain ones primary res??? There's one paragraph that I've read that appears to say that but as I'm not a real estate attorney I could (& prob am) be mistaken. Just curious of people's thoughts and experiences with this type of situation.

Thnx!

Drew

Drew NA I want to point out I am not an attorney but I can tell you from experience, once you have fulfilled the first year as an owner occupant, you can pretty much do whatever you which with your property.

You are fine, i did the same thing with my house in the woodlands. Just make sure to sell it within the time limits to not have to pay cap gains!

Budgeting also for insurance, maintenance & capex (10%), vacancy (10%) and property management (10%), this home will cash flow at about $30/month at the lowest rent price point ($1200). If you happen to get more rent and/or self-manage, even better.

The clause you are referring to sounds like something you'd see with a FHA loan, and yes, it is common in order to get the attractive interest rate that you owner occupy for a certain length of time, generally one year. After that, you can turn it into a rental no problem.

Cypress is a great area with a wonderful school district. This would make an ideal rental - hopefully you have somewhere else you can go without increasing your cost of living too drastically.

Thnx the the advice,

@Sam, you mean the "live 2 of the 5 most recent years" to avoid capital gains? I was thinking if holding it for longer then that. You recommend renting for 3yrs and selling (by the end of the 3yr mark)???

Sharon, I imagine maybe an FHA. The original loan was conventional and and the refi was w/ the same credit union. We would be willing to even down size to a condo or something else , live there then turn that into our 2nd rental.

@Drew D Exactly the way I started. My first four are rentals, number 5 is likely to become a flip but it was a cash purchase.

@Drew D You need to run the numbers to determine if that is worth it. I know I will have so much equity in my woodlands rental by then that it will make absolute sense to save my taxes, sell that property and put the cash to work other ways. Your situation may be different.

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