How to Buy a Second Home and Rent the First

Read Time: 3min
Last Updated: 5/21/2021

So you want (or need) to buy a second home and rent the first. Who says you can’t have your cake and eat it too? Buying a second home and treating the first as an investment property holds financial benefits like extra income and tax breaks while giving you the option to reclaim it as your primary home later down the road. Let’s discuss the right moves to take in order to make buying a second home and renting the first a cakewalk.

How to Buy a Second Home and Rent the First

Know Your First Home Loans Rental Rules

One of the first to-dos when figuring out how to buy a second home and rent the first is to confirm with your lender that your current mortgage loan allows you to rent. These are some general guidelines for different loan types; however, we recommend confirming with your lender before you begin the rental process to avoid getting caught in hot water.

Different Home Loan Rental Occupancy Rules

Federally insured home loans (USDA, FHA and VA loans) expressly prohibit their finance properties from generating income unless the loan is entirely paid off. From here, each loan type holds its own set of guidelines and restrictions.

FHA loans permit single-family home rentals if the reason you’re buying a second home is for work relocation, or you need more room for your biologically expanding family. However, you must have lived in your primary home for at least one full year. On the other hand, USDA loans allow room rentals only to help the primary owner compensate for lost wages if the event they find themselves incapacitated and unable to work. Otherwise, there are no rentals allowed of the home (or even a room in the house) until you own the home outright.

Veterans who’ve taken advantage of a VA loan can rent out their primary home if they experience a permanent change of station (PCS), deployment before (or during) the process of purchasing the home is complete, or they have a job in a previous state to which they must return.

Conventional loans require the homeowner to occupy the home for at least one full year but are generally more lenient in occupancy restrictions.

Review Your Home Loan Options

Once you’ve confirmed you can rent out your primary home, start researching the best home loan options for home number two. To qualify for two homes, borrowers often encounter higher interest rates and strict qualification requirements for the second home loan. That extra rental income will help you out here! Complete a mortgage comparison to see the differences in mortgage rates, and take advantage of mortgage calculators with taxes to get a more accurate estimate of what you can expect to pay on mortgage number two.

Prepare Your Home For Renters

Preparing your home to suit renters is a big deal. Do a full sweep of your home and make sure everything is up to code, leaving nothing to chance for a potential lawsuit or reason for tenants to refuse rental payments. Consider hiring a property manager to take care of seasonal duties like snow plowing, shoveling, landscaping, or emergency calls.

Aside from the physical aspects of the home, you’ve also got to think about the legal side of things. Properly screening applicants, charging a reasonable yet profitable rent and using a well-rounded lease agreement will be key to a successful rental property. Protect yourself by brushing up on landlord-tenant laws, rights and responsibilities. Make it easy for tenants to pay rent and keep records of every rent receipt, maintenance bill and correspondence you have with your tenants.

While learning the ins and outs of how to own two houses comes with its fair share of hoops to jump through, if done correctly, buying a second home and renting the first can be one of the best decisions you’ve ever made. Online mortgage lenders like Wyndham Capital can make the process to buy a second home and rent the first less stressful with the digital tools and knowledgeable loan officers you want on your side to become a successful second-home owner. Contact us to get started today!


Matthew Harris is the Internal Communications Manager at Wyndham Capital Mortgage. With over 11 years of experience writing and creating content about topics from sports and culture to financial systems and business, Matthew brings his expertise to the mortgage industry. Matthew oversees Wyndham’s internal communication and content strategies to help drive the internal messaging and creating content that gives both employees and borrowers relevant and reliable information to help them make informed homebuying, selling and refinancing decisions. Matthew has a Master’s Degree in Communications from Purdue University and a Bachelor's Degree in Journalism from Appalachian State University. His interests include social media marketing, content creation and catching the occasional sports game.

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