How soon can I convert a rental property to my primary residence?

[Rick Im]

I recently purchased a rental property and discovered it needs more extensive repairs than I originally anticipated. If I rent out my current primary residence, I could generate over $1K in positive cash flow, so I'm considering moving into the rental property and handling the repairs at a more manageable pace. I understand there's a one-year waiting period before converting a primary residence into a rental property, but does this same one-year rule apply when converting a rental property into a primary residence.

I have another question. When I purchased this property, I used my HELOC to cover the 25% down payment. From what I've found online, there appears to be a 6-month seasoning period before refinancing, but this may not apply to non-cashout refinances. After completing the repairs, I expect that 75-80% of the renewed property value will be close to my purchase price, and my goal is simply to recoup the down payment. Would this be considered a non-cash-out refinance?

[Devin Peterson]

Quote from @Rick Im:

I recently purchased a rental property and discovered it needs more extensive repairs than I originally anticipated. If I rent out my current primary residence, I could generate over $1K in positive cash flow, so I'm considering moving into the rental property and handling the repairs at a more manageable pace. I understand there's a one-year waiting period before converting a primary residence into a rental property, but does this same one-year rule apply when converting a rental property into a primary residence.

I have another question. When I purchased this property, I used my HELOC to cover the 25% down payment. From what I've found online, there appears to be a 6-month seasoning period before refinancing, but this may not apply to non-cashout refinances. After completing the repairs, I expect that 75-80% of the renewed property value will be close to my purchase price, and my goal is simply to recoup the down payment. Would this be considered a non-cash-out refinance?

Rick, these are some great questions! To answer part one of your scenario, it depends on what type of loan product you have on the investment property that you purchased. If you use a DSCR, you cannot occupy this as a primary residence under most circumstances due to the explicit commercial use specified in the note. However, if you use a more traditional product, you may have some wiggle room.

as far as the cash out/refinance goes, different lenders have different overlay. Typically what you will see is that bank will acquire 3 to 6 months seasoning for cash programs. You may find some folks out there that don’t require a seasoning. At all, but be wary of higher rates and fees associated with something like this.

Happy to connect to talk more strategy and detail on creative financing, and investment strategies! Good luck!