Can You Rent an Apartment if You Own a Home?

Owning a home and simultaneously renting an apartment is a permissible arrangement, as no real estate laws prohibit a homeowner from also being a tenant. The decision to maintain two residences involves a range of important considerations. Understanding the various reasons individuals pursue this path and the associated financial, legal, and logistical implications is important for anyone contemplating this dual living situation.

Understanding the Feasibility

Many circumstances can lead a homeowner to consider renting an apartment. A common scenario involves job relocation, where individuals may need temporary housing near a new workplace while evaluating a permanent move or deciding whether to sell their current home. This allows for adjustment without the pressure of an immediate property sale.

Individuals may also choose this path when seeking a different lifestyle, such as downsizing from a larger home to a smaller, more manageable apartment with less maintenance. This can provide access to urban amenities or a simpler daily routine without immediately selling their primary residence. Some homeowners strategically convert their owned property into an income-generating rental asset, moving into an apartment to facilitate this investment.

Temporary living arrangements, such as during extensive home renovations or when providing care for family members in a different location, are another reason for dual residency. It also offers an opportunity to explore a new neighborhood or city before committing to a home purchase there.

Financial Implications of Dual Residency

Budgeting for two residences requires careful planning. This includes accounting for the mortgage payments, property taxes, homeowner’s insurance, and maintenance costs associated with the owned home. Simultaneously, one must budget for the apartment’s rent, renter’s insurance, and utilities.

Mortgage agreements often contain “owner-occupancy clauses” requiring the borrower to use the property as their primary residence for a specified period, typically 12 months after closing. Violating such a clause can be considered mortgage fraud. Consequences may include the lender demanding immediate repayment of the entire loan balance or initiating foreclosure proceedings.

Renting out the owned home introduces specific tax considerations, as rental income is generally taxable. However, property owners can deduct various expenses, including mortgage interest, property taxes, insurance premiums, utilities, repairs, and depreciation. The Internal Revenue Service (IRS) provides guidance on reporting rental income and expenses, and consulting a tax professional is advisable.

Effective cash flow management is important when maintaining two properties. Sufficient liquid funds or a stable income source are crucial to cover both sets of expenses. An emergency fund can provide a financial buffer for unexpected costs or periods of vacancy if the owned home is rented out.

Renting an Apartment While Owning a Home

Landlords often view homeowners as financially stable, which can be an advantage during the rental application process. Landlords will still conduct standard background and credit checks. These checks help assess an applicant’s ability to consistently meet rental obligations.

Typical application requirements include a credit check, where landlords often seek a credit score of 620 or higher, though requirements vary. Income verification is also standard, usually requiring documentation like pay stubs or bank statements, to demonstrate a gross monthly income sufficient to cover the rent. Even without a traditional rental history, a homeowner’s financial standing can serve as a positive indicator.

Prospective tenants should carefully review all terms and conditions of the apartment lease agreement before signing. This includes understanding the lease duration, rent payment schedule, fees, and policies regarding pets or property alterations. A thorough understanding of the lease helps ensure a smooth tenancy and avoids potential misunderstandings.

Managing Both Properties

Managing both an owned home and a rented apartment involves distinct logistical considerations for maintenance and upkeep. If the owned home is rented out, the homeowner assumes landlord responsibilities, including addressing tenant repair requests. This may involve coordinating with contractors or hiring a property management company.

Property management companies typically charge a monthly fee, often ranging from 8% to 12% of the collected monthly rent, to handle tenant relations, maintenance, and other administrative tasks. If the owned home remains vacant, regular checks are necessary to ensure security and prevent issues like burst pipes in colder climates, often requiring utility management to maintain essential services.

Adequate insurance coverage is important for both properties. The owned home requires homeowner’s insurance, and if it is rented out, a landlord insurance policy is necessary to cover risks associated with rental properties. For the rented apartment, renter’s insurance is advisable to protect personal belongings and provide liability coverage, typically costing around $12 to $23 per month.

Overseeing two properties increases the time commitment required for management and oversight. This includes coordinating maintenance, handling administrative tasks, and ensuring all financial obligations are met. For those with limited time, engaging a property manager for the owned home can alleviate many of these burdens.