The paperwork details that make or break a live-in-then-rent conversion

The insurance jump is the one nobody warns people about. 350 a year sounds like nothing until you notice it is most of the cash flow on a deal priced like this.

What happens to your numbers if the rent is 2,300 instead of 2,525? By my reading you're negative every month and paying to hold it. I'm not saying that's wrong, plenty of people carry a small negative for the amortization and the low down payment, but I'd want to know you priced that case before you signed. Did you have a floor rent in mind when you bought, or did you find out what it rented for after you moved out?

@marcus_hale41 that is the right question to ask. 119 a month on a 312k house is close to a rounding error. One water heater eats the year.

Dumb question but I want to ask it. When you moved out, where did you go? Are you renting now, or did you buy the next one already? I never see that line in these posts and it seems like it matters a lot.

The lease-before-application sequencing is the practical bit here. A common failure is applying for the next loan with a verbal "my brother is moving in" and nothing executed, at which point the underwriter counts the entire payment as debt. That alone is enough to cost someone the approval. Doing it in that order was the right instinct.

What's an occupancy affidavit? Is that separate from the mortgage itself?

@bmoreno23 it's a one page thing you sign at closing where you state you intend to live there. The occupancy covenant is also inside the security instrument, which is the deed of trust or mortgage depending on your state. Warrant read both, which is more than I did on mine.

Six weeks of vacancy and you're underwater for the year. That's the whole risk in a sentence. Did you have a tenant lined up before you moved out or did you eat any gap?

The PMI is the piece worth tracking closely. On a conventional loan there's usually a path to removing it based on the loan balance against the original value, and a separate path based on a current appraisal, and lenders treat investment properties differently from primary residences on the appraisal route. 118 a month is 1,416 a year on a house producing thin returns. Worth a call to the servicer to get their written policy rather than assuming it falls off on its own.

@sonia_alvarez that's a real number. 1,416 is more than the whole year's cash flow.

Four properties in, the thing that will bite you next is not this house. It's the debt to income calculation when you go for number three. Two prior mortgages on your credit report and a lender who wants two years of rental history before they'll count the rent at full value. Get comfortable with your lender's specific rules now, because they differ and they change.

The occupancy covenant living inside the security instrument, rather than somewhere more visible, is a detail that gets missed constantly, even by buyers who've spent months reading up on notes and conversions. It's a useful reminder that the surprises tend to sit in documents already signed and not read closely enough, not in the parts people expect to check.

Did you do any work on it while you lived there? I'd have been tempted to redo the kitchen and then found out the rent doesn't move.

@mitchell_ray4 don't. I've watched three people renovate a house to their own taste and then discover the rental market pays for a clean unit and nothing above that. Paint and floors move rent. A 14k kitchen usually doesn't, in the price band we're talking about.

What's your actual return here? 15,600 in, roughly break even on cash, plus maybe 4,000 a year of principal paydown early on at that rate. I'm not being snide, I want to see how you're thinking about it, because on a spreadsheet that's a slow number and the whole case rests on rent growth over ten years.

One thing worth adding to that file. Check whether a policy actually converted or whether the carrier issued a new one with a different effective date, because a gap of even a few days between a homeowner policy ending and a landlord policy starting is the kind of thing that surfaces at claim time. The binder can say one date while the declarations page says another. Ask for the declarations page and read the dates directly.