Changes from Owner Occupied to Completely Rented Duplex

1 Reply

I've been looking into purchasing a duplex as an owner occupant utilizing no money down with a VA Loan. After this is completed and I have lived in the home for a certain period of time, I would be looking into renting out the unit I occupy and purchasing another duplex. What changes can I expect when I make this switch from owner occupied to full blown rental property? Insurance, refinancing mortgage, tax implications, etc. etc. Thanks and happy Monday everyone!

I can comment on the tax implications:

Hopefully, you will be able to rent out the side you were living in. This means a higher income from the rental property. If you have a regular W-2 job, this will effect your tax return because you now have more rental income that you'll have to report. 

There are certain tax deductions you get for rental properties, like depreciation, that are based on the percentage of the house you have rented out. This will obviously jump from whatever it was before to 100%, hopefully offsetting the cost of the raised rental income.

On your property taxes in most states you get a "personal residence exemption", which is also based on the percentage of the property you live in. I live in a duplex, so I get 50% of this tax reduction. When you move out, you have to report that you are no longer living there, the percentage will go down to 0% and your property taxes will go up. You should be able to look up all of this information on the county or cities tax assessment website or local office. 

Other comments:
I'm not sure about VA loans, but with FHA loans you are only allowed to have one at a time. This means you'd have to refinance before you buy another property with an FHA loan.

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