Turning Primary Residence into a rental.

3 Replies

Hi BP Family, I bought a move in ready townhouse last September and have been doing smaller renovations since then. Backsplash in kitchen, removing popcorn ceilings, renovating bathrooms etc. My next step is to buy another property but it will take another year or two to save up 20-25% to put down on an investment property. However, I was thinking about turning my primary residence into a rental after I have lived there long enough to meet the requirements of my lender. I think it will be easier to acquire another conventional mortgage rather than financing an investment deal. So I have 1 specific and 1 general question. 1. Where in my loan documentation does it say how long I have to declare this my primary residence before I can make it a rental? (Don't want to commit mortgage fraud.) 2. Has anyone else had any success early in their real estate careers by acquiring more properties this way? Best, Adam

HI Adam- Welcome! This is exactly how I started my portfolio, house hacking. I think it's the best way for the average person to get the ball rolling.

This depends on what type of loan you have. Most conventional or FHA loans require that you intend to live in the home for at least a year. That doesn't mean you are required to do so, only that you intend to do so. If your intention was one year when you bought it, you have fulfilled that requirement, even if your plans change in three months and you move out and rent it.

As for your second question- yes, I've started this way, but there is some strategy to it that you should keep in mind. Your equity can be leveraged as "cash," so you don't necessarily have to save up another down payment. That being said, it is essential that you buy property at a great deal with equity from day one, or you force equity after you acquire the property. My goal on every purchase I make is to have a minimum of 25% equity six months after the purchase. This generally allows you to pull all of your cash out and purchase your next investment.

Best of luck out there!

Yeah I don't want to tell you to ignore some of the banking language but.....I once got a loan on a personal residence that ended up saying we could never rent the property lol. Not only did we rent it after the year we went back to the exact same bank for our next loan on a personal residence and the exact same banking officer. 

Originally posted by @Adam Bosley :
Hi BP Family,

I bought a move in ready townhouse last September and have been doing smaller renovations since then. Backsplash in kitchen, removing popcorn ceilings, renovating bathrooms etc. My next step is to buy another property but it will take another year or two to save up 20-25% to put down on an investment property. However, I was thinking about turning my primary residence into a rental after I have lived there long enough to meet the requirements of my lender. I think it will be easier to acquire another conventional mortgage rather than financing an investment deal. So I have 1 specific and 1 general question.

1. Where in my loan documentation does it say how long I have to declare this my primary residence before I can make it a rental? (Don't want to commit mortgage fraud.)

2. Has anyone else had any success early in their real estate careers by acquiring more properties this way?

Best,

Adam

 Hey Adam

House hacking is how many, if not most, investors get started.  You'll have to use lenders to your advantage. Seek out lenders that understand what you're trying to do and ask them about specific guidelines and products that will help you minimize your out of pocket cash.

Stephanie