Can I rent out my HUD home - cash purchase?

Asked by Dexter, 98367 Mon Jan 24, 2011

Can I rent out my HUD home?
I’m buying a HUD home with cash as an owner-occupied, after it has been sitting on a market for around 2 months at the time of bidding. It is scheduled to close soon in a few weeks here. Now I want to live somewhere else, but don’t want to cancel our deal with the HUD home (afraid of losing our deposit).

My research indicates that the home is mine and I could do whatever I want since I am paying all the expenses on it. (1) Is this correct?
(2) But the main question is……How long after closing, can I rent this HUD home out?
(3) Is the rule different between cash buyer vs. with FHA financing?

Thanks in advance

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Gerard Dunn, Agent, Chevy Chase, MD
Tue Jan 25, 2011
If you say you are purchasing the home as an owner occupant - you may get preferred status from HUD to purchase.

Although you are paying cash - if your intent is to rent the property - why not just buy it as an investor?

Chances of HUD coming after you are slim to none. I would not lose sleep over this. Cash is King!

Good Luck!

Gerry Dunn
Associate Broker
Serving Maryland, D.C. and Northern Virginia
2 votes
Sarah Klamm, Agent, Wellsville, KS
Mon Jan 24, 2011
I would call your states HUD office and ask them for sure. FHA financing would be different than if you just paid cash.
1 vote
Robin Noe, Home Buyer, Lawrenceville, GA
Thu Sep 6, 2012
ok that was all really helpful... but what if you are paying cash, for a hud home for our daughter to live in it because she can't qualify... then we want to cash out.. can we then refi the house. She would be on the deed and so would we. She would also be staying at that property. Any advice would be appreciated. Thanks
0 votes
Sandra Mp, Home Buyer, Outside U.S.
Thu Jul 19, 2012
You have to live in owner occupied HUD home 12 months and after 12 months you can lease it out.
0 votes
Robert Pratt, Agent, Chicago, IL
Fri Jan 28, 2011
In the past, it is perhaps true that the chances of "getting caught" were slim.

That being said, these are new times and if you agree to purchase as an owner occupant and then immediately rent it out (and your intent, now, before closing and at the time of closing, is to do so), that COULD be deemed fraud.

Best bet for you, Dexter, is to consult your real estate attorney about this question BEFORE you close.
You want to be CERTAIN that you are covering your bases.

Best of luck to you.
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0 votes
Dexter, Home Buyer, 98367
Thu Jan 27, 2011
Sarah & Gerard

Thanks for your advice and I did call HUD, she (HUD) said I have to resubmit the bid as an investor and the earnest money is up to the person that managing the account. Once she asked me for my name and the property location - I just said" thank you" to her and then hung-up.
BTW the HUD penalty is $250K and 2 years in jail – that is the last thing I heard from her.. scary.

I was not planning to rent it out but my situation had changed after the offer got accepted.
First, we were waiting for bank short-sale property and unfortunately the deal fall apart. In desperation, we offered HUD property and HUD accepted our offer the next day. However, 3 days later, the bank that own short-sale property sent our agent the letter of approval.

We do have the money for both. It looks like we have to stay in HUD property for minimum 12 months and rent out the short sale property - darn.

I just want to do the right thing without constantly looking over my shoulder

Thank you both and I appreciate your comments.
0 votes
I am almost certain that Owner Occupants are allowed to purchase for children. I would verify that information with another employee at HUD. Considering the market, if you explain your situation and ask, I would think the listing agent might obtain approval to accept another buyer's offer without penalty to you. And of course you can always get out of the contract after paying for an inspection, and based on the inspection. Read your contract thoroughly.
Flag Mon Oct 21, 2013
I don't understand why if you are paying cash for a home, HUD owned or not, why or how they can control what you do with the property after you purchase it? If you were financing through FHA I could see it, but once you pay cash for a property or have a private lender, why can they control the use of the property?
Flag Sat Oct 19, 2013
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