How to Buy a Second Home and Rent the First in 8 Steps

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Contributor, Benzinga
October 10, 2023

Buying a second home and renting the first can provide a much-needed source of income. Before purchasing, decide if your finances place you in a strong position to obtain another property. Reach out to professionals in the financial and real estate realm to understand the potential impact purchasing a second property can have on your taxes and finances. When done correctly, purchasing a second home and renting the first can offer an added sense of security.

Why Turn Your Home into a Rental Property?

Turning your home into a rental property has multiple benefits. For example, having a rental property can create another source of income, maximize your tax benefits and build wealth for the future. 

Add Another Source of Income

Adding another source of income may prove beneficial to gain passive income. Rental properties are considered passive income after the initial time and effort put into the property have already been accounted for. Rental properties provide predictable monthly income, which can offer an added layer of financial stability. 

Maximize Tax Benefits

Owning a rental property can offer unique tax benefits. For example, you can deduct rental operating costs and depreciation. Deductions can include fees related to owning and maintaining the property. Speak with a tax professional to learn more. 

Build Wealth

Turning your home into a rental property can generate passive income. Passive income from an investment property helps build wealth that is not directly tied to your active work such as a salaried job. Keep in mind that rental income from one property will likely be an excellent stepping stone on the road to accumulating more properties. 

8 Steps to Buy a Second Home and Rent the First

Buying a second home with the intention to rent the first might seem complicated, but with the right information, the process can feel simple. According to the U.S. Department of Housing and Urban Development, properties are considered principal or primary residences when occupied for most of the year by the owner. Speak with industry professionals such as capable lenders and knowledgeable Real Estate Agents to have the best information at your disposal. 

1. Evaluate Your Finances

If you are thinking about buying a second home, examine your budget constraints and financial goals. Speak with industry leaders such as lenders and insurers to understand if funding a second home is the right choice for you. 

2. Find Money for Another Down Payment

When finding money for another down payment, have a clear budget and examine down payment options. For example, in some situations, it might be possible to use the equity in your current home to cover the down payment for your rental property by using a home equity loan. Examine the mortgage terms and interest rates before taking a loan. 

Before getting a home mortgage, shop around for the ideal lender. Lenders offer a wide selection of loans that can provide you with the funding needed to achieve your goals. Applying for a loan does not guarantee loan approval. Top lenders frequently offer tools such as blogs and mortgage calculators to offer borrowers insight. 

3. Talk to Your Insurer

Before renting your first home, speak with your insurer. You might need additional insurance to proceed. Shifting your first property to a rental might change your rates.

4. Understand the Tax Implications

Many factors will impact your taxes, including the number of days in the year that you intend to rent your home. In certain situations, it’s possible to deduct your property taxes. Speak with a tax attorney or tax professional to understand the tax laws related to you.

5. Find Tenants

Finding trustworthy tenants is an important part of the rental process. Have a set list of criteria to understand what you are looking for when screening a renter. Consider working with a property manager or leasing agent to more effectively screen tenants.

6. Decide How You’re Going to Manage the Property

Decide how you would like to manage a property to accurately budget for a property manager or leasing agent. You can manage the property on your own, but a manager can help with finding trustworthy tenants. Reputable property managers know how to minimize vacancy while maximizing rental rates. Managing a property yourself allows you to save on potentially costly property management fees while also offering you more control over the property. Compare the options to decide which strategy would work best for you.

7. Set Up Your Financial Infrastructure

Craft your financial infrastructure by understanding the inner workings of your property as well as the surrounding neighborhood. Offer a competitive rental to have a better chance of earning a steady rental income. 

8. Get Your House Ready to Rent

The process of getting your house ready to rent may include renovations and placing your house for rent on multiple real estate websites. Take quality photos and videos of your house to showcase your property in a favorable light.

Factors to Consider in a Second Property

When preparing to purchase a second property, examine factors such as the location, cost, size and general neighborhood. For example, it’s a good idea to know where your second property is in relation to public schools, grocery stores and restaurants. 


Location plays a large factor in the desirability of a second property and the potential costs related to purchasing it. Key components such as a property’s proximity to public transportation, schools, grocery stores and attractions affect the desirability of the location.


Before purchasing a second property, examine potential upfront and ongoing costs. Upfront costs include a down payment and closing costs. Ongoing fees will likely include a mortgage as well as taxes. 


Consider the size of the property prior to purchasing. In some situations, it might be favorable to purchase a smaller property in a bustling area of the city. In contrast, purchasing a larger house in the suburbs might work in your favor if you are interested in having more square footage.


A neighborhood has the potential to heavily impact the price and desirability of a home. One of the best ways to research a neighborhood is to visit it yourself. Consider going to the neighborhood at different times of the day to get a feel for the location and people.


High levels of crime can make it difficult to sell a property down the line. Crimes such as theft and burglary create an unsafe environment and will likely increase an individual’s stress level. Before purchasing a home, review local law enforcement reports and research the crime in a neighborhood.

School District

Certain school districts can attract potential homebuyers to the neighborhood. Review the schools in the neighborhood to understand their rankings. Even if you are renting to others, a good school district makes your rental home desirable for tenants and enhances its appreciation value. 

Ultimately, purchasing a second property requires dedicating a fair amount of time to examining contributing factors ranging from the neighborhood to the location and cost.

Spread Your Wings with a Second Property

Property remains one of the best investments because it offers a predictable cash flow, tax benefits and the ability to grow wealth over time. Before funding or purchasing a second home, speak with industry professionals ranging from mortgage lenders to tax attorneys to see what opportunities best fit your situation. Buying a second home while renting the first can provide an added level of predictability while acting as the wind beneath your wings as you soar to financial security.

Frequently Asked Questions


Can you rent your house if you have a mortgage on it?


Depending on lending requirements, it’s possible to rent out your house if you are still making mortgage payments


What are the lending rules when renting out your home to buy another?


When renting out your home, lending rules tend to vary depending on the mortgage lender, location and rental terms.


Is being a landlord worth it?


Based on how you weigh the potential drawbacks and benefits, being a landlord might be worth it.