Owner Occupant vs Tennant Occupant

3 Replies

Recently bought a condo and took out loan as owner occupant since that was the only way I could get the property since the complex was already over the 50% investor ratio. I'm coming to close to having the property for a year now and want to rent it out. What are the laws on this? I thought after a year you could rent out a owner occupant property just like an FHA loan. Any help would be greatly appreciated as I want to start cash flowing!

Thanks everyone!

It depends. There are two parts to the OO to NOO/rental conversion, the loan/insurance and the HOA since it is a condo. You don't say who had the 50% investor ratio issue so I'm not sure if that was part of the loan requirement or the HOA allowing a rental.

So the easy one loan/insurance: 

All you need to do is fulfill the OO period of the loan. That is 1 year for the OO affidavit you signed, which you've apparently done so you can now rent it out. Some people seem to think you have to pursue a new loan or update your lender somehow, this is not the case. You obtained financing under the intention of OO, so once the spirit of that agreement is met (1 year) you're free to do with the property as you wish. Insurance just needs to be updated from a normal dwelling policy to an investment policy. This will give you a higher liability limit (since there is a risk of litigation by a tenant) and lower you personal property coverage since you don't have any belongings in the unit to cover. The personal property (tenant's stuff) will not be covered by your policy, which is why they need to have renter's insurance for a catastrophic loss.

The HOA portion:

If the HOA has a rental restriction then you'll need to get their approval to rent the property. Yes this is legal and should be a part of the CC&R's. So if they are already at their max and you want to rent the home out, you'll have to go through whatever their process is to get approved, and may need to wait until another current rental goes OO so you can be approved.

Hope that helps.

Awesome! Appreciate it Matt. Yeah it was Fannie Mae that had the investor ratio problem. Do I need to contact HOA then or just transfer my insurance over so I can rent?


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