How long does one need to live in a primary residence before it can be rented out as an investment property?

Asked by Sarah Payne, Alexandria, VA Thu Sep 25, 2008

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Brian Martuc…, Mortgage Broker Or Lender, Bethesda, MD
Fri Apr 24, 2015
It depends, and a lot of this is subjective and variable.
Have you bought yet?
If so, when did you buy?
What circumstances are leading you to need to rent it out?
If you have not bought, and are just wondering if you can game the system and buy as an owner occupant to get the owner occupant rate, to then turn around and rent it, that is mortgage fraud and you should not do that. Just buy it as an investment property and pay the investment property rate, it's not that much higher, and it's better to tell the truth.

If you have lived there for a half of a year, for example, and there are circumstances that are causing you to need to rent it out, like a job relocation, or moving in with a significant other, or financial issues, then rent it out to do what you need to do.
2 votes
Other/Just L…, , Fleming Fitch Grant, Holly Hill, FL
Fri Sep 26, 2008
If you have an FHA insured loan, you must occupy the dwelling within 60 days after closing and continuously occupy for at least 12 months.

If you have a conventional loan, there are restrictions on qualifying for a loan backed by Fannie/Freddie to purchase another primary residence. Unless you can document that the home you wish to rent out has at least 30% equity, you must document that you have at least 6 months' reserves for BOTH mortgages (principal, interest, taxes, insurance, HOA if applicable) in order to qualify for the new mortgage. Rental income from the property to be converted to invetsment cannot be used for income qualifying unless you can document 30% or more equity in the home (using an appraisal, AVM, or Broker Price Opinion from your Realtor).
2 votes
whittlewise, Home Owner, Miami, FL
Thu Apr 23, 2015
If you qualified for the loan with the subject property being a primary residence on your loan application than you must occupy the property for at least one year per the occupancy agreement you signed at closing. They have the right to call the loan if they find out you are not occupying the residence within a year of the loan funding however very few would in practice.
1 vote
real estate…, , Montgomery County, MD
Fri Sep 26, 2008
does one need to live in it for what? That your lender will allow you because you signed an agreement with them that it was your Primary residence? that you can claim for capital gains purposes?
At the end of the day it's your property and you make the decision... but consider what you agreed on with your lender.
1 vote
Monika Kumar, , Sterling, VA
Thu Sep 25, 2008
You can consider your property as investment property anytime or day you start renting it - if you want. But your lender may object since you bought it as Primary. ; You should ask an expert- But on the other hand if your Q pertains to capital gains then -
2 Yrs. out of LAST 5 yrs. is the rule for Primary residence. For example you moved out in August 31st 2008 and rented then till August 30 2011 (recorded) it is still considered your primary to avoid capital gains. BUT if you close after that then you may not be able to avoid capital gains.

I think Q needs to be little more precise and situation oriented to help If I were you I would ask a tax advisor.
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1 vote
Laura Ries P…, Agent, Miramar, FL
Thu Sep 25, 2008
It all depends on what and where you are buying a property. A community that is governed by an HOA or Condo Board have different rules and regulations for renting. Some condos you might have to wait a year, others you can rent out after you purchase.
Make sure you ask your agent what the rental restrictions are in the community before you purchase.
1 vote
Josh Barnett, Agent, Carney, OK
Fri Apr 24, 2015
Depends on that property's mortgage and what the clauses in the mortgage state. Consult an attorney for legal guidance on your mortgage and the mortgage's clauses.

Be sure to thumbs up helpful answers.
0 votes
Lyn Villanue…, Agent, Fairfax, VA
Sat Jul 31, 2010
Because of certain guidelines I would say it would depend on the type of loan that was taken out..such as a conventional loan or FHA. You may also need to talk to your tax person to see if it would harm you when filing your taxes for the following year. If you plan on buying another property and using that property as your primary residence the property would have to be at a higher amount than what you paid for on your current property. The lender will look at the loan to see if it is a tangible benefit based on your situation.
0 votes
Lori Jeltema, Agent, Suffolk, VA
Sat Sep 27, 2008
Sarah, don't make ANY decisions without consulting your lender and being absolutely sure that you are complying with their rules regarding being and owner/occupant. It may be your property but the bank holds the mortgage on it. If you do not do what you are supposed to do, the lender may CALL YOUR LOAN. This means that they will make you pay your loan off now or force you out of your loan and make you refinance with another lender with an investor loan. That loan will probably carry a higher rate. With the lending industry tightening up their loans, you may not be able to afford your home any longer with the new payments. If you turn your home into an investment property, you have to report this to your insurance company who is going to promptly (and rightfully so) report it to your mortgage company. Read your mortgage documents, call your lender and get a clear answer from them. Having an investment property is wonderful and a smart move but doing it the right way is a smarter move. These sites are a good resource for information and there are a lot of great, helpful people participating but you aren't going to convince your lender that they shouldn't do anything to you cuz 'that's what I read on the net'. Good luck, congratulations for having a potential investment!
0 votes
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