Hi, we bought a house in May with 30year fixed mortgage. Due to financial situation, I would like to Airbnb it. Is there any issue from Mortgage perspective? Is there any issue due to insurance Please provide pros and cons of doing this. Tc 400k
Just be careful when you invite strangers into your home, especially if you have kids. That’s obvious but I really want to emphasize this. If you don’t mind me asking, what’s your financial situation? How much was the house and how much is the mortgage?
I am thinking of renting it out completely. (My kids will not be there). Single income and no job security and the bills are accumulating. Mortgage 1.8M
You have a 1.8m mortgage on a single income 😳🤯
Your mortgage company will not know if you are renting your home out as an Airbnb. I have never heard of the one year rule mentioned above and I have owned 8 homes (read your mortgage documents). Make sure you adjust your home owners insurance and stay in compliance with local regulations. It's a lot safer to find a tenant.
You will need a different type of insurance if you’re renting it out long term or short term. It might end up cheaper. For long term you should have the tenant carry renter’s insurance as mandatory in your lease.
Talk to a lawyer and your accountant as well. There are a few things that you want to consider, don’t take chance 1. Are you on visa or not 2. Are you going to report this income or do it under the table 3. If you do it cash then be careful when the tenants stop paying rent 4. Where are you going to live? You’ll need to change your address on W2 — hopefully it’s in the same city so no pay adjustment. 5. When you eventually resell the house, legally you’ll need to stay in there for 2 years (in the 5 years before selling) to take tax exempt on first 500k profit And the last is insurance type. Mortgage company may not care as long as you pay for it, they may sell your mortgage to other companies soon.
How does visa change all of this?
All important points, Netflix.
My mortgage has a provision about it being primary residence for one year. Whether the mortgage company would actually care or enforce it is another question. As pointed out above, make sure your insurance covers short term rental. And don’t be so sure AirBnb will be more lucrative than regular rental. It may or may not be, depending on many factors.
If you are not living there, it's no longer your primary residence.
Just make sure you don’t have an FHA loan that requires you to live at home for a certain period of time. And then get renters insurance for your home. Those two things should answer your questions.
If you have an HOA, double check that they don't prohibit short term rentals.
Airbnb - You need to furnish it. If using your own furniture, expect things will get broken, small things will get taken/stolen - Assuming it’s a large house, you’re going to have people requesting to have many more people than you expect. People ask to have 2x the number of bedrooms. So you need extra sleeping accommodations and inevitably people sleeping on couches - Frequent cleaning and resets - Frequent resupply of toilet paper, paper towels, towels, blankets, pillows, sheets - You need to respond timely to requests, and pretty much be on call for random stuff. - Make lots of extra key sets. People lose them, accidentally take with them, forget them in rental cars, or call you at 2am to be let in because they left it at a friends house and don’t want to disturb others in the house. It’s a hassle and since pandemic, I think people’s manners and civility have gotten much worse. Decent people can get a hotel for sale or less which leaves Airbnb for those who just party. You’re better off doing long-term rental if that works for you.
Mostly you are required to live in the house as your primary residence for the first one year of the mortgage. If you will live in the house, you are more than free to rent out the extra space. However renting out the full home without you in it in your first year might be a breach of your contract depending on the state.
Is 1 year the legal threshold? I don’t see this in any mortgage doc. If so I can wait for a few more months to do this.
The requirement is in one of the contract docs. Look carefully in there. I went through a terrible fight with the lender on this. Better to avoid it.