Can I Turn My House Into A Rental If I Have Less Than 20% Equity?

[Peter Jindra]

Currently renting an apartment and am strongly considering buying a house in the next year, with the plan of living in it for 1-3 years, and then turning it into a rental. By the time I am ready to buy, I won't have enough for 20% down payment on a house that I'd want, and would probably have to save up for another year. 

I would be comfortable taking out a loan with less than 20% down payment, although, I thought I remember hearing that there are restrictions on renting out a home with less than 20% equity, but now I can't seem to find the answer from googling.

So my question is: Can I eventually rent out a house if I don't yet have 20% equity in it? If not, are there any creative solutions to getting around this, or should I save up for a higher down payment that's at least close to 20%, so I can rent after a year or two?

[Kamil Baldyga]

Difficult to answer this question but generally speaking, yes. I say it is difficult to give a definite answer because some lenders and insurance companies may have certain stipulations for their products. You would just need to call and ask honestly, and if they won't, someone will. Generally speaking, the amount of equity doesn't prevent you from turning it into a rental. I used a VA loan, so I put no money down and my equity is about %1, for one of my properties and will be converting it to a rental in the next upcoming months.

Hope this helps, let me know if you have any questions!