Renting with FHA loans - Hypethetical

[Cody Beard]

Please understand that this is just a hypothetical curiosity question/discussion, the action described below is illegal and I know that, just having a discussion!

I have looked at several properties lately and a few days ago I jokingly said to my partner "wouldn't it be nice if you could buy a rental with an FHA loan and not have to live in it?"

That made me think - what's stopping someone from doing that? We all know that it's against the FHA regulations and of course the "law", but (hypothetically) could a person not buy a second home with an FHA - as long as they qualify - under the presumption that they will move in and live there....but not? I'm certain there is some something in place to ensure that doesn't happen, or else everyone would do it! ...or do they? Could there be a whole slew of "investors" out there taking advantage of the FHA system? Of course you can only get four mortgages under FHA but someone could buy four multi families under FHA and rent them "illegally" and have a nice rental income.

If you think about it, how hard would it be to have a good tenet move in and rent the house from you for a year without the FHA knowing about it. As long as you don't have to serve an eviction notice or anything that attracts attention to the fact that you are renting, it seems unlikely the FHA would ever know. Just thought that was an interesting thought and wanted to share :)

"Of course this is all hypothetical, isn't it Tom? - of course, professor"

Seriously though.