Short term rental OK when purchasing with FHA?

Question

Heard some mixed information on this, but just wanted to clarify: If one purchases a property with an FHA loan, is it legal to short-term rent a portion of the house or other unit/ADU? while living in the property or after one year/leaving the property?

Brittany Minocchi · Answer

No portion of the housing is to be used for transient or hotel purposes at any point that an FHA loan applies to the property (whether in the first year of occupancy or not). The FHA defines transient as anything less than 30 days, and hotel purposes would be if occupants are provided things like maid service, laundry service, etc...

January Johnson · Answer

Yes, the insurance (to cover an STR) will tip off your lender that you are not living there.  (And of course you should have STR coverage if it's being used as an STR!)

Caroline Gerardo · Answer

Lenders can have different overlays and ins and outs and different disclosures for you to sign. Some have the verbiage saying you cannot have hotel use some say no transient rental under thirty days some do not spell it out. You have to live there for 12 months. I have no seen any who yet use the words /brand names short term rental, AirBNB, VERBO... as of today, tomorrow a lender could come up with a new form. The intention of FHA is for an owner occupant to get in to full time housing with low down payment. If you are advertising a single family as any rental property on month one online the record is permanent and can be a problem.

You cannot get insurance coverage for STR on single family with the FHA loan in place for 12 months. If you don't get the insurance if anything happens you are not covered. If the property is two units you will have from day one coverage for rental and tenant.

Most short term rentals are where the tenants come for a weekend and rent the whole house and the whole property is used so in that situation you would not be living there full time and advertising such can get you in a bind.

Also your HOA/ city / neighborhood can pull the plug on STR whenever they decide.

I hope this spells out the options feel free to call and ask if not clear.

Nathaniel Ziomek · Answer

@Brittany Minocchi I have seen that verbiage, which is the reason I am posting this because I am currently talking to lenders and none of them are saying it is a problem.. but @Caroline Gerardo - you're saying that the only thing that matters is living in the property myself & it being a multi-unit or ADU?

@Ryan Thomson A realtor I spoke with said he had to do this, which is the first time I heard about this and why I am asking the question.

I'm afraid the answer right now isn't seeming clear cut to me given the different responses to this post alone lol

Ryan Thomson · Answer

@Nathaniel Ziomek I have had one FHA buyer out of a lot of FHA buyers have to sign something at closing saying they won't use it for hotel purposes. Ask your lender. Ask another lender.

Caroline Gerardo · Answer

You sign a contract that you will live there for a year. Short term rental is public when you list on AirBnB or VRBO the trustees of the note/ servicer/lender would have the right to call it due in full if they found out. How would they find out you ask? If you try to change your hazard insurance to include the risks of STR or a rental policy in the first year this triggers notice to them. If you leave the hazard policy as owner occupied you might not be covered by perils caused by tenant.

If the property is 2-4 units you can certainly STR right away the other unit(s). If single family you could add an ADU rental if there is space and you have the money.

After a year you can rent it STR, assuming city/county/HOA allows

Andrew Postell · Answer

@Nathaniel Ziomek your FHA lender should be able to answer this very definitively but essentially the loan requires you to occupy the property for 12 months. Outside of that, there are no prohibitions when it comes to renting the property. You can rent out each room, rent out the garage, an ADU, we use FHA loans for 2-4 unit properties as well.  Nothing against long-term, short-term, or mid-term renting as long as you are occupying the property for 12 months.  Oh, and as mentioned above, check local requirements for the OTHER things that might be needed for a STR.

Allan Smith · Answer

The type of loan you get has almost nothing to do with what type of renting in the city or county allows you to do. For example, in my city, we have to get permits for short-term rentals. But again it does not matter what type of loan I have.

Short term rental OK when purchasing with FHA?

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