Purchasing New Primary Home and Renting Current Home. What are my next steps?

Question

Our current home is insured as our primary dwelling. We just bought a new home and are closing in a few days. We will gradually move out in the next month from the existing home into the new home. For the current home, we have found tenants and have a signed lease and deposit. What are my next steps? For insurance, I am assuming I need to convert my home insurance from primary to landlord. Any tips would be greatly appreciated.

Mohammed Rahman · Answer

That’s right, you’ll want to convert your current homeowner’s policy to a landlord policy so you’re properly covered once the tenant moves in. Make sure it includes liability protection and consider adding loss-of-rent coverage. You should also require your tenant to carry renter’s insurance, which helps protect their belongings and adds another layer of liability protection for you.

Since the home is currently listed as your primary residence, it’s a good idea to notify your mortgage lender about the change. Most lenders are fine with this, but you want everything documented properly.

Other next steps include finalizing and tightening up your lease if you haven’t already. Make sure all terms are clearly outlined, collect the security deposit and first month’s rent, and document the property condition before move-in with photos or video.

You’ll also want to figure out utilities (what stays in your name vs. the tenant’s), and start treating the property like a business. That means tracking income and expenses from day one, ideally in a separate account.

Lastly, check if your town requires any rental registration or inspections before a tenant moves in (this is easy to overlook but important depending on the municipality).

Colleen F. · Answer

@Ashraf Khan you are going to have to formalize the landlord part of the relationship with the doctor friend. That means letting them know you will stick by the terms of the lease and also that you would like repair requests in written form. This protects you both of you in the case of a disagreement. It is as simple as an email but it will formalize what happened. If they call write email/text to confirm issue/resolution. Don't agree to things outside the lease. Make sure all utilities are switched on the date of lease start/occupancy etc. Require renters insurance and be clear what your insurance won't cover for them so they get why they need it. I get it you trust this person but nothing makes things go wrong more than a lack of clarity in communication.

Denise Supplee · Answer

Yes, you’ll want to switch your current policy from primary to a landlord policy before the tenants move in, and make sure there’s no gap in coverage. Also require tenants to carry renters insurance.

Double check your mortgage too, some loans require you to notify them when converting to a rental.

From there, just make sure you’ve documented property condition, have a solid lease, and clear processes for rent collection and maintenance.

Ryan Spath · Answer

Congrats on the new home that’s a great position to be in, essentially turning your current place into your first rental.

You’re thinking about it the right way with insurance. Once you’re no longer occupying the property, you’ll want to switch from a primary homeowners policy to a landlord (dwelling) policy. I’d recommend calling your insurance agent now and giving them the exact timeline when you’re closing, when you expect to be fully moved out, and when the tenant lease begins so there’s no gap in coverage. They’ll usually coordinate the policy change to line up with tenant occupancy.

Outside of insurance, this is a good time to make sure a few key things are buttoned up. Confirm your lease is solid and covers things like maintenance responsibilities, late fees, and expectations clearly. Make sure you’ve documented the property condition with photos or video before the tenant moves in, and complete a walkthrough with. You’ll also want to transfer utilities appropriately, set up a system for rent collection, and make sure you’re compliant with any local landlord requirements.

Since this is your first one, think of it less as “renting your old house” and more as starting a small business. Having a separate account for rent and expenses, setting aside reserves for repairs and vacancy, and getting a basic process in place early will make everything smoother.

You’re on a really solid path this is exactly how a lot of portfolios start! Fell free to DM me with any specific questions.

Ashraf Khan · Answer

@Ryan Spath I had my lease looked at by several people who are knowledgeable in this area and overall believe it is very solid and includes the items you have indicated. Thank you for the note, and I appreciate it. The renter is a doctor friend of mine who has a family, I feel especially comfortable with them.

as you suggested, I did create a seperate bank account. I will have a +$550 surplus after pa yong mortgage and will not be touching the account nor the savings until I grow it to a healthy amount.

Ashraf Khan · Answer

@Peter Mckernan thank you for the feedback

Peter Mckernan · Answer

Couple things one as you mentioned, get the insurance switched and I would also think about doing an umbrella policy for insurance as well. Gives you the ability to cover anything between the renters insurance that you should have your tenants get, your landlord insurance you will switch to, and anything in between. That is what I would be looking for if I were you on covering the stuff for liability standpoint. Also, I would be using at least a PMC or realtor for the getting the house marketed/lease done/disclosures outlined. If you have a solid foundation though you can find all the lease items and everything else on sites like this for your state. I would just make sure someone does a once over with it for you so you are covered on anything that might come up that could put you in a bad spot with the tenants in terms of lease etc.

Purchasing New Primary Home and Renting Current Home. What are my next steps?

Purchasing New Primary Home and Renting Current Home. What are my next steps?

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