How soon is too soon to move out of primary and rent it out?

[Peter Baudendistel]

Mercy, I need some insight to ensure I'm not crazy...

TLDR: 

LTR Tenant dies of COVID 2 months after I close on new primary.  My wife and I are interested in moving into the smaller rental and renting out our NEW primary for more CF. Our intent WAS to stay in the new home for a minimum of 1 year, but with the change in occupancy status of the smaller and less expensive rental, we think it would be worthwhile to downsize for a bit. However, we don't want there to be any question of fraudulent activity on our end...  Thoughts?

Full Story:  

My LTR tenant, who signed a two year contract earlier this year and had lived in our home for over 1.5 years, died of COVID last week. 

My wife and I have NEVER lived in the home he occupied (a 1 BR, 1 BA), but did occupy the a larger home sharing a driveway and on the same lot (a 3BR/3BA). We had successfully short term rented the unoccupied space in our large home, and recently opted to STR our large home in its entirety due to our success in partial home STR (we have had a great track record since starting STR back in 2013 or so). Ultimately, this move resulted with one STR house and a LTR house on one lot, and nowhere for us to go!

Therefore, we purchased a smaller (2 BR/2BA) home in the same neighborhood, and have been happily living in it for a couple of months (October). The intent was to stay in the new hours for 12 months, and then consider another purchase or move back into our STR home as our new primary would transition into a LTR. However, the death of our original LTR tenant has the potential to change these plans completely as the home is no longer subjected to an additional 18 months of lease.

There are a lot of reasons to desire to move into the smaller rental. It is easier to maintain, and we could spend some time renovating the interior. The smaller home has a better view of the lake, and is right next door to our successful STR, so we've got less "commute" time. The homes are literally 2 blocks away, and there's no step down in quality of the neighborhood.

Renting either home out LTR would equate to about the same EOM cash flow after Vacancy/Maintenance/Utilities/Taxes/Insurance, but the risk is less if we move into the smaller rental. We simply don't "need" the space we have now, and would be better optimized if we rented it out earlier within our timeline.

Personally, I think the death of the contracted tenant is enough of a scenario change to justify a move out of my new primary and into that property, but definitely don't want there to be any questions of fraudulent activity as my wife and I have been very aggressive on purchases over the last few years (4 buy and hold purchases in 2020).

So, what do you all think?  Too questionable, or a justified move?

[Mindy Jensen]

I don't think the death of a tenant is a qualifying event for you to move to the other home so soon after the purchase. Can you shorter-term rent it (like 6 months) and then move in after you've met your occupancy requirements?