Convert Personal property to Investment Property

Asked by Ravi, Sparr Heights, Glendale, CA Mon Aug 25, 2008

Presently, I am a Condo Owner. I am thinking about buying a Townhouse and Keep the condo as an investment Property. What are the steps involved in order to convert the condo from Personal property to Investment Property.

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Greg Zaccagni, , Illinois
Mon Aug 25, 2008
BEST ANSWER
Fannie Mae is updating the policies for qualifying borrowers purchasing a new principal residence and converting their existing principal residence to a second home or investment property.
New Requirements:
Fannie Mae will continue to permit up to 75 percent of the rental income to be used to offset the mortgage payment in qualifying if there is documented equity of at least 30 percent in the existing property (derived from an appraisal, AVM, or BPO, minus outstanding liens). The rental income must be documented with: a copy of the fully executed lease agreement; and the receipt of a security deposit from the tenant and deposit into the borrower's account. If the 30 percent equity in the property cannot be documented, rental income may not be used to offset the mortgage payment. Both the current and the proposed mortgage payments must be used to qualify the borrower for the new transaction; and reserves to be determined by DU and could be up to 6 months of PITI for both properties.
1 vote
Lisa Schade, Agent, Libertyville, IL
Mon Aug 25, 2008
Hi Ravi-
Many first time investors do this.
The first thing you must do, is look at your CCR, or the homeowners association for where the condo is located. Making sure that they allow renters.
Then you must tell your loan officer or the bank that you are changing the property from personal to investment property. That may mean that you will have to refinance. And your home owners insurance will need to be changed as well. You will need to tell the Homeowners insurance company that it is now investment property.
Hope that helps!
1 vote
Emily Medvec, Agent, Santa Fe, NM
Mon Aug 25, 2008
Contact your CPA or tax advisor for information specific to your investment related to your tax solutions during new ownership and conversion of your condo. Contact your financial advisor and/or lender about best use of your funds related to a future townhome purchase. Contact a Realtor specializing in investment property in your area and review comps and your expected return on your investment for your townhome purchase. Good luck. Emily Medvec
Web Reference:  http://www.emilymedvec.com
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