Owner Occ?
I just purchase a single family I was going to live in while rehabing then flip.
Then I looked at a 4 family today ( at a great price) that I would like to buy. It has one vacant unit that would be alot better to live in while rehabing my single.
My question is, If I plan to move into the 4 family while fixing up the single to flip what type of loan do I need to get seeing I cant owner occ. 2 properties?
Thanks,
S.S.
Don't know if it'll work in your state, but here in Nebraska, If i were in your situation, i could move into the single for a week or two, move back out and tell my lender that i didn't like it. Then i could owner occ. the unit in the 4 family bldg. I'd suggest that you check with your lender and see if this is an acceptible practice there.
There is no legal definition.
It comes down to intent.
If you expected to move into the SFR and filled in an application as an OO then it would be a OO loan. A week after loan approval you decide to move somewhere else. The intent at the time the loan app was filled out was clear. Hence you would not be required to change things if the loan had already funded. If it had not funded there could be a check to see if anything had changed. An honest answer would be that something has changed.
So, there is no exact time for how long you need to move into the SFR. As there is no hard rule then the lender will want to see evidence of a move. Change of address for you mail, you actually move in and terminate your other accommodation, etc.
To argue loan fraud they other side has to prove that you knew when you took out the loan that you had no intent to live there. That you were trying to deceive they. You would have to argue that you had intended to move in but your situation changed downstream. Then it is up to see who has the better argument.
John
[addsig]
So, there is no exact time for how long you need to move into the SFR.
That's not exactly true. Most loans have a stipulation that the residence must be owner occupied for at least one year. Penalties for failing this condition range from rate adjustment to calling the loan. I'd check over your loan package.
As far as loan fraud and proving intent, etc, etc, I wouldn't want to chance it. If it came down to that, it wouldn't be too hard to prove loan fraud (whether intentional or not) if you close to owner occuppied loans within a couple of months of each other.
Personally, I'd stick with your plan of living there and fixing it up. If you live there 2 years, then all of the profit will be tax free when you sell. If you're really interested in this 4plex, then buy it as an investment. The difference in interest between a NOO and an OO is usually only about a 1/2% or so. Hardly worth in potential problems down the road, in my opinion.
Roger
Thanks for all the replies. I am still unsure what I am going to do. I have only had this property about a week and it is gonna be crazy to be doing these repairs while living here. However if we can pull through it we could rent out the 4th unit and make even more cash flow. The choice is not to avoid the .5% more for the NOO, just to make it easy for me to do the repairs I want to without having to live there.
You must have a game plan when you invest in a subject property along with an escape plan.
Many investor make a purchase on a subject property and than figure out after the purchase what they are going to do with the property.
I have several steps in dealing with a property purchase:
If I plan to hold and rehab and this sounds like what you plan to do.
I have all the funding in place 1st!
I see what rehab funds are available at the city, county, state and federal level.
I also take steps to turn the subject property into income producing ASAP.
Even if I plan to hold and rehab:
I still put the subject property on the market as is for the first 30 days.
After the first 30 days I have all the exterior work done and than put it
On the market for another 30 days as is.
At this point if no sale occurs I than have all the entire work done and yet again
Put it back on the market for yet another 30 days.
If in this 90 days the subject property does not sale I will consider a lease option purchase or owner finance even on rentals I plan to hold as this process eases some of the landlording headaches.
In your case I would suggest taking the easiest unit to rehab, get it done and rent it out fast and than go to the next unit and repeat this process until the project is completed.
Do look into any local rehab fund available to you at the city, county, state and federal level as the interest rates are outstanding and I have even been given grants for rehab funds. I just love free money.
[addsig]
JohnMichael-
And where would this secret supply of grants and loans be found? Honestly, I've heard of them but always when someone was trying to sell me the information in a book or in a list- until I've heard it from you, I haven't listened.
Thank you-
Tom
New Beginning Homes of Southern Ohio LLC