Can You Rent Out Your Primary Residence?

Local landlord-tenant laws may influence your ability to rent out your home. Check with your city or county to determine what laws may apply. Your homeowner’s association (HOA) may also have policies regulating when and if a home can be occupied by someone other than the primary owner.

Your mortgage lender may have specific requirements about who occupies your home.

The same is true for specific loan programs. For example, if the current primary residence is encumbered by an FHA loan and a new FHA loan is being granted, FHA has specific guidelines regarding distance requiring at least 100 miles between the departure residence and the new residence.

On one hand, renting out your home can offer tax benefits. You can take tax deductions on expenses such as repairs, insurance, HOA fees, property taxes, and other costs that go into maintaining the rental property.

On the other hand, you’ll have to pay income tax on rental income. There are other tax implications to think of, as well, such as capital gains tax. If you decide to sell the property, you’ll pay capital gains taxes unless you’ve been the home’s primary occupant for at least two of the previous five years.

First-time landlords may need to secure additional permits or licenses from their local government to ensure that the home meets all basic safety and habitation standards.

Being a landlord is a major responsibility. You’ll have to handle duties like collecting rent, securing tenants, and performing basic maintenance and repairs to the property.

If you’re in the area, you can save money by doing these things yourself. You have the option of outsourcing to a property management company. Doing so may add to your total costs but will save you the time and the hassle of managing the property on your own.

As a landlord, one of your most important tasks will be to find reliable tenants. You’ll want to find someone to live in the home who you can depend on to pay their rent on time and be respectful of your property.

Your home must be kept in safe, livable condition. You may need a property inspection before renters move in. After this, you’ll need a system for handling maintenance requests. This is where it helps to have a property manager perform maintenance and repairs on your behalf.

The most important clauses and provisions include things like:

• The tenant’s responsibility for the full rent amount, even if they have roommates
• Limiting the property to residential use only (no home businesses)
• The landlord’s right to access the premises
• The details of renewal clauses
• Addendums related to lifestyle factors (smoking, pets)
• Disclosures about repair history (such as a history of asbestos and lead paint)

When in doubt, contact a real estate attorney for additional guidance on how to draft a rental agreement.

Naturally, the most important information revolves around rental income. You’ll need to establish policies and procedures regarding things like:

• The amount of the security deposit (typically one month’s rent)
• Rental due dates (and any potential “grace period”)
• Late fees for unpaid rent
• The right to evict for nonpayment of rent

These provisions give you legal recourse when dealing with delinquent tenants and protect you from unpaid rent.

There are a number of difficulties associated with renting out your primary residence, such as: 

• You’ll pay capital gains tax if you sell a home you haven’t occupied 
• You’ll have to manage the property 
• You may need additional insurance coverage for a rental property 
• You may face challenges with local zoning boards or HOAs 

Being a landlord isn’t easy. Be prepared to navigate these challenges when renting your home.

Many of the laws that regulate rental properties are unique to different areas. Consequently, you’ll need to learn all you can about landlord-tenant laws. You’ll also need to stay informed about regulations surrounding the Fair Housing Act to ensure that your property complies with all regulations.