If you currently own your home and wish to relocate, turning your home into a rental property can allow you to move without the hassle of selling your home. Renting your home can even allow you to become a renter yourself and downsize temporarily while maintaining your mortgage payments and even turning a profit.
How to convert a rental property to your personal residence?
Example: Jane buys a home on January 1, 2009 for $400,000, and uses it as rental property for two years. On January 1, 2011, she evicts her tenants and moves into the house, thereby converting it to her principal residence. On January 1, 2013, she moves out and rents it again. She then sells the property for $700,000 on January 1, 2014.
What happens when you turn your rental home into a personal home?
Turning your rental home back into a personal home is a win-some/lose-some situation. A lot of your rental tax breaks disappear once you stop renting the property out. As compensation, however, you may get other benefits, such as a lower tax bill when you sell the house. Whether the switch is a net gain for you depends on your personal situation.
When do you move out of a rental property?
On January 1, 2013, she moves out and rents it again. She then sells the property for $700,000 on January 1, 2014. She has a $300,000 gain (profit) on the sale. Jane owned the house for a total of five years and used it as a rental property for two years before she converted it to her residence.
Can a primary home be converted to a rental property?
Converting Your Primary Residence to a Rental Property Fannie Mae’s guidelines are quite favorable. In the event that your current property is a single unit home, you will be allowed to use 75% of the monthly lease amount on your current home. The other 25% is considered money to cover expenses common to property investors.
