Convert secondary home to rental

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Convert secondary home to rental

Deepak C.
Rental Property Investor · Member since 2018 · 15 posts · 5 votes

Hello BP community,

I’m a newbie to real estate and had a question that has in the past been addressed to some extent. I wanted to see if there are any lenders here that can provide their input.

I recently bought a secondary home (2 months ago) in San Diego CA. I put 25% down, and at that time we were thinking to keep this as a vacation home where we plan to retire eventually. It was also financed as a secondary home (I was told that there is no difference in rate in the current environment between a second home or a rental). We’re reconsidering our decision to keep this as a second home and want to make this into a rental so that it does not sit empty most of the year. Based on the rider, this has to be a secondary home for at least 1 year. Can we ask the lender about converting this to a rental? I don’t want to just do it and potentially commit mortgage fraud. 

Alternatively, it seems like we can make this a short-term rental. Is a month-to-month lease considered a short-term rental?

Thank you for your time and help.


DC

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  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    2y

    Month to month is not considered a short term rental (STR). San Diego city defines STR as less than 30 days (this is the most common definition). The city of San Diego has STR quotas but only the Mission Beach area is at its quota limits.

    It is my belief that a change of use that was not planned is not mortgage fraud.   You may need to be able to justify why it is no longer a 2nd home (your rationale, what has changed in the 2 months since purchase that led you to change your mind on usage?).   Or you can wait 10 months and not require any justification.  

    I have some San Diego STRs and MTRs and will say we had the slowest off season since the Great Recession (not including COVID lockdown times). STRs and MTRs are a lot more effort than LTRs and my STR/MTR units are not currently performing well enough to justify the increased effort. I am hoping for a very good prime season to recover some of decreased revenue.

    Good luck



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  • Deepak C.
    OP
    Rental Property Investor · Member since 2018 · 15 posts · 5 votes
    2y

    Thank you so much for the reply. I live in Texas, so info on San Diego STR rules is very valuable. Thanks for that.

    As for the rationale, should I talk to the lender about it? Is there a reason for them to say no, given that it would have made no difference to them one way or the other?

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