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Anyone who purchased a 2nd primary residence and turned the 1st into a rental, how much savings/income did you have relative to your mortgages?

I’m looking to rent out my current residence and purchase another to live in & rent. Someone advised I not purchase a second place until I can afford to fully cover both mortgages. Makes sense in theory but who actually does this in practice? Wouldn’t a few months savings if I’m out a renter be more realistic?

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I just keep 6 months worth of loan payments in reserve.

You do have to consider the scenario where the tenant refuses to pay and refuses to leave. It could take longer than you’d like to evict the tenant. Think moratorium.

You can also consider getting a line of credit to help with liquidity. It will help with edge cases such as above, but during economic downturn, it may not be reliable.

likesmart

Thank you! Yeah my worst case scenario was sell since I’m in a good area/school district, but I’ll add LOC as a step in between

If you owned the first house a long time, converting it to a rental could give away your 250k/owner tax deduction on the gain. If you have a big gain, you could do better to sell the first house, take the tax deduction on the gain and start over buying a new house to rent.

^was also wondering this

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