Refinancing home as rental?

[Qacer]

I have an opportunity to work in another country for a year. I'm also considering refinancing my home. If I take the job and while I'm gone, the house will be rented. After a year, I will come back and live in the house again. Currently, if I refinance while I'm out, then the only option I have is to refinance my primary home as a rental property.

What considerations should I be aware if I refinance the house as a rental property? Will I be able to qualify for any homestead benefits in the future if my primary home is considered a rental property?

 

[edro]

Why do they have to know about the 1 year of renting? Don't tell anyone.

 

[Vdubchaos]

a) will you or someone close be around in case something goes wrong? if not, do NOT proceed. You can also look into Rental Management companies, but they cost $$$.

b) check the laws in your state. Each state has it's own laws and the devil is in the details. There is many people that rent > don't pay > use law against home owners to live for free (especially low income/welfare families with kids).

c) ask potential renter for a $15-20 fee for credit check (tell them it will be refunded if it comes thru ok). If they refuse, you just got lucky and got away with headaches/shitty renter. Most people with good credit will not even hesitate. Ask for references from previous landlords/leases > call them.

d) Accept that your house will get damaged in places. No renter will care for your property/treat it the way you do today. If you have carpets, they will be ruined.....

 

[NetWareHead]

Refinance the property while you still live there (or while it is still listed as your legal mailing address/primary residence). Once you get a tenant in there, that home becomes rental/investment property. Usually ppl seeking to refinance a home will get the best rate for a primary residence and rental/investment property gets the second tier rate. Refi it now and then get a tenant in there.

 

[Vdubchaos]

Refinance the property while you still live there (or while it is still listed as your legal mailing address/primary residence). Once you get a tenant in there, that home becomes rental/investment property. Usually ppl seeking to refinance a home will get the best rate for a primary residence and rental/investment property gets the second tier rate. Refi it now and then get a tenant in there.

Just don't let mortgage company OR Insurance find out you are renting.

Say the house burns down.....you might be SOL. Make sure your home/investment is protected!!!

 

[highland145]

^^
What they said and the interest rate on rental property will be higher. And the debt to value for the loan will be different because it's a rental (30% the last time I had any). Tax issues with depreciation/repairs/expenses, if you file properly, and then moving back in....etc.

 

[SpatiallyAware]

So you are only going to be gone a year?


I would not rent it out in the 'general' sense. Do you not have a friend/family member who you can rent it to for 1/2 off?


Renting to the general public is a friggin nightmare. I've done it in various forms for years, and have gotten to the point where I'm selling everything. It's just not worth the stress and constant battles.

Rental management companies, in my experience, are not that great. I have a buddy who used one, the trash tenants flooded the houses with shit water, the rental company kilz'd over the walls, replaced the carpet, and said good to go! Pull the carpet back and there is mold.

Even ones that are decent still rent to absolute trash. If you are on good terms with your neighbors that will not last long. If you have nice carpet it will be replaced with builder's grade crap. Painters will paint over hinges, striker plates, and they don't tape anything off.



Seriously... For one year..... I would eat the cost of the mortgage before renting.

 

[NetWareHead]

Just don't let mortgage company OR Insurance find out you are renting.

Say the house burns down.....you might be SOL. Make sure your home/investment is protected!!!

I don't know what other people's mortgages say but mine does not forbid renting the property out. In fact the first property I purchased has been converted into a rental after I lived there for 5 years. Re: homeowner's insurance, most insurance companies allow you to convert a homeowners policy to a landlord policy. Mine became about $125 more expensive per year.

 

[Vdubchaos]

I don't know what other people's mortgages say but mine does not forbid renting the property out. In fact the first property I purchased has been converted into a rental after I lived there for 5 years. Re: homeowner's insurance, most insurance companies allow you to convert a homeowners policy to a landlord policy. Mine became about $125 more expensive per year.

Many mortgage contracts clearly state that you will not rent the property (I know my does).

But I'm sure some don't.

 

[SpatiallyAware]

I don't know what other people's mortgages say but mine does not forbid renting the property out. In fact the first property I purchased has been converted into a rental after I lived there for 5 years. Re: homeowner's insurance, most insurance companies allow you to convert a homeowners policy to a landlord policy. Mine became about $125 more expensive per year.

Generally HUD and FHA are the only ones that prevent this sort of thing.

 

[edro]

Our real estate taxes are reduced 2.5% if you live in the property.
Rentals don't get the 2.5% reduction.

 

[dmcowen674]

I have an opportunity to work in another country for a year. I'm also considering refinancing my home. If I take the job and while I'm gone, the house will be rented. After a year, I will come back and live in the house again. Currently, if I refinance while I'm out, then the only option I have is to refinance my primary home as a rental property.

What considerations should I be aware if I refinance the house as a rental property? Will I be able to qualify for any homestead benefits in the future if my primary home is considered a rental property?

Don't rent it furnished.

Some states such as Oklahoma have the law that says you are willingly giving away all your furniture and possessions to the renter that the renter gets to keep permanently.

 

[D1gger]

So you are only going to be gone a year?


I would not rent it out in the 'general' sense. Do you not have a friend/family member who you can rent it to for 1/2 off?


Renting to the general public is a friggin nightmare. I've done it in various forms for years, and have gotten to the point where I'm selling everything. It's just not worth the stress and constant battles.

Rental management companies, in my experience, are not that great. I have a buddy who used one, the trash tenants flooded the houses with shit water, the rental company kilz'd over the walls, replaced the carpet, and said good to go! Pull the carpet back and there is mold.

Even ones that are decent still rent to absolute trash. If you are on good terms with your neighbors that will not last long. If you have nice carpet it will be replaced with builder's grade crap. Painters will paint over hinges, striker plates, and they don't tape anything off.



Seriously... For one year..... I would eat the cost of the mortgage before renting.

This is what I did when I was on assignment for 18 months. I rented to a good friend and his wife, who looked after the place very well. We charged about 1/2 the potential rental rate, and they had the opportunity to save for their own home. It was a win win.

 

[Apathetic]

Why do they have to know about the 1 year of renting? Don't tell anyone.

Because on the federal 1003 form, one of the fields you have to fill in specifically asks this. If you lie, it's mortgage fraud.

Property will be:
�� Primary Residence �� Secondary Residence �� Investment

Dave