Buying your first home is a big milestone. But what if your starter home could also be the start of your real estate portfolio? With the right strategy, you can purchase a home using a primary residence mortgage — which often comes with lower down payments and better interest rates—and later convert it into a cash-flowing rental property.
Here’s how the process works, what to watch out for, and how to make it a smart step toward building wealth.
✅ Step 1: Buy Smart with the Future in Mind
When you’re buying a home that you might rent out later, think like both a homeowner and a landlord. That means considering:
- Neighborhood desirability for renters (proximity to jobs, transit, schools)
- Low-maintenance layout and systems
- Good bedroom/bathroom count for rental comps
- HOA rules (some restrict or prohibit rentals)
Even though you’ll be living in the property initially, choosing a home with rental potential gives you more flexibility down the road.
🧾 Step 2: Use a Primary Residence Loan to Your Advantage
One of the biggest benefits of this strategy is financing. Lenders offer more favorable terms for owner-occupied homes:
- Lower down payments (as little as 3% with conventional or 3.5% with FHA)
- Lower interest rates
- Easier qualification standards
💡 Important: Most lenders require you to live in the home for at least 12 months to fulfill your primary residence occupancy requirement. You’ll usually sign a document at closing agreeing to this.
🏠 Step 3: Live in the Home for One Year
During this period, enjoy the benefits of homeownership—stability, tax deductions, and building equity. And start preparing:
- Research local rental rates
- Connect with a property manager if you don’t want to self-manage
- Plan for repairs or upgrades before you rent it out
After you have lived in the property for 12 months, you are generally free to move out and convert it into a rental.
💼 Step 4: Transition to a Rental Property
Once the one-year mark is up, you can:
- Rent the property to long-term tenants
- Refinance into an investor loan if needed
- Use the rental income to qualify for your next mortgage
This is where the snowball starts: You move into your next home, possibly repeating the process, while your old home becomes an asset that pays you monthly and builds long-term equity.
🚨 What to Watch Out For
Before you go all-in, keep these points in mind:
- Loan fraud is serious: Never claim you will live in a property if you don’t intend to. That’s mortgage fraud and can lead to legal trouble.
- Landlord responsibilities: You’ll need to maintain the property, handle repairs, and manage tenants—or hire someone who will.
- Insurance changes: Once you move out, switch to a landlord or rental dwelling policy.
- Tax implications: Renting the property means potential rental income taxes—but also deductions for expenses and depreciation.
First-time homebuyers can qualify for a mortgage with as little as 3% down* and HomePerk can help you cover the downpayment or closing costs.
🔁 The Bigger Picture: Repeat and Scale
This strategy—sometimes called the “live-in-then-rent” method—is one of the most accessible paths to building a rental portfolio. It’s popular among house hackers and first-time investors because it allows you to get started with minimal capital and less risk.
Over time, you can repeat the process every couple of years, acquiring multiple properties while using owner-occupied financing to your advantage.
🏡 Final Thoughts
With the help of your real estate agent, you can begin the fun part of the home-buying process — searching for your dream home. Before you start, it can be a good idea to create a list of your must-haves and nice-to-haves, considering factors such as location, size, amenities, and proximity to schools, workplaces, and public amenities. This will help guide your real estate agent in finding the right homes to show you.
Turning your home into a rental property is a smart, strategic way to enter the real estate market. By starting with a primary residence loan and planning ahead, you can live affordably now—and build wealth for the future. At HomePerk, we are ready to help.
*Down payment assistance offered pursuant to your employer’s down payment assistance benefit plan and is accomplished through an unsecured down payment assistance loan. The down payment assistance loans may be provided by CharlieMike Financial, Inc. or other partner banks or credit unions. Certain restrictions apply. Subject to borrower qualification and subject to obtaining a mortgage from an eligible mortgage partner.
$0 down is based on obtaining a mortgage for 97% of the purchase price of your home from an eligible mortgage partner and funding the other 3% of the purchase price with a down payment assistance loan. The down payment assistance loan has a term of 60 months and the borrower experiences an interest rate of 0% (actual note rate 12%), assuming all principal payments are made when due by the borrower, as the result of the rate being permanently bought down. Buydown funds may not be redeemed for cash or credit and are nontransferable. The monthly payment on a $10,000 loan at 0% interest for a 60-month term is $166.67. Subject to certain conditions.