Owner Occupancy Tax Implications If I Don't Occupy?

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Duplex I'm trying to buy is 100 occupied at GREAT positive cash flow-wonder why do people sale prop with this positive cash flow?-Any way buying FHA under criteria that I will occupy-what are my tax implications if I never move in? And wonder if I did move a tenant out, How long must I stay there to satisfy the terms of FHA owner occupancy?

Comments(8)

  • DaveT3rd May, 2004

    Quote:Duplex I'm trying to buy is 100 occupied at GREAT positive cash flow-wonder why do people sale prop with this positive cash flow?There could be many reasons behind a seller's motivation. Top of the list is an almost immediate need for cash. Seller could be tired of managing a rental property, moving out of state, or just wants to retire. Recent high double digit appreciation rates may have influenced some sellers to cash out now while the market is hot.

    Quote:Any way buying FHA under criteria that I will occupyYes, FHA owner occupant loans are available for a duplex, even offering 97% financing to first time home buyers.

    Quote:what are my tax implications if I never move in?Not sure where you are coming from here. You generally don't have income tax concerns until you sell the property. Your concern should be a conviction for loan fraud. Falsifying your loan application to obtain an FHA owner occupied loan when you have no intention of occupying the property carries a maxlmum penalty of two years in a federal prison and a $250K fine. Remember, FHA loans are for owner occupants only.

    Quote:And wonder if I did move a tenant out, How long must I stay there to satisfy the terms of FHA owner occupancy?As long as you occupy one of the units in the duplex as your primary residence for at least one year, you are free to use the other unit as a rental with no adverse impact on your loan or your loan application.

    After you have satisfied the one year occupancy requirement, you are free to convert your residence unit to a rental. Now, buy another duplex, apply for another owner occupied loan from a conventional lender, and repeat the process.

  • jjetts43rd May, 2004

    1 year....if you dont move in the people who investigate are the FBI....but prove it...who is going to go by and knock and ask for you if you live in either one.

    Just a thought.

  • DaveT3rd May, 2004

    jjetts4,

    So you are saying it is OK to commit loan fraud as long as you don't get caught?

  • c-brainard4th May, 2004

    The better question is: Is it worth the 1% lower APR and risk 2 years in jail and a huge fine. I don't know about ya'll, but I think I can make more than that 1% on this side of the bars smile

    -Chris
    [addsig]

  • Bruce4th May, 2004

    Hey,

    I was speaking to a guy at HUD the other day about NOO claiming OO status and bidding early (this is along the same vein as loan fraud, so bear with me). He said they do NOT investigate after the property is sold...(wait for the other shoe)

    ...because they do NOT have to, as another investor will turn you in. He said in Hot RE markets, they are catching more and more NOO as a result.

    The point is, you never know how you can get caught.

  • StaciPeace4th May, 2004

    my reasons for the post weren't to gain fraud tips!!!! It;s that one high paying tenant lease is up sooner thanthe lower paying tenant. So if I must occupy at all, I wanted the unit where the lower paying side is...............You guys are great. Thanks
    Staci

  • DaveT5th May, 2004

    Now you have a different question. If you obtain an owner-occupied loan, you are usually expected to occupy within 60 days of settlement.

    I don't see a lot of difference between the owner-occupant rates and the investment purchase rates. At Countrywide, they are the same. I am sure you will find other lenders that offer the same rate too.

  • StaciPeace5th May, 2004

    THANKS JOHN, APPRECIATE A POST THAT DOENST RELATE TO ME AND BEHIND BARS, ETC!!!!!!! AND THANKS ALL!! LOL

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