Rental Property Investor · Youngstown, OH · Member since 2016 · 58 posts · 45 votes
I'm currently in the midst of acquiring a multi-family property and have a question regarding taking an FHA loan out but not really "living" at one of the units.
See, I currently live alone with my parents and would prefer to keep it that way as I have no OOP expenses save for my own. The property I'm planning on purchasing is actually on the same street some five houses down. My idea is to take out an FHA loan on the property and "live" in one unit, as in have my mail and whatnot set for that address, but still stay at my parents. This way I'm able to rent out all of the units and continue not having to pay rent.
My questions are --
(1) How does the FHA know whether or not you live onsite? Do they physically check?
(2) If I rent out all of the units, can I still do a standard rental lease for the unit I'd be "living in," or would I have to go the roommate route instead? Does FHA care?
@Charlie MacPherson Thank you for your input and for the resources, I never knew that it would fall under insurance fraud. Guess I'll be tossing that idea out the window! Haha
Ya I was going to say this is right up there with tax evation and other ways to screw the govmit.. dont' get caught no big deal get caught and you will probably wish you had not.. plus its just not fair to the investing public..
If it's a good deal, I'd suggest you move in to the smallest unit for a year and move out.
If you want to stick with you parents, just make that one unit your office or something and continue living with your parents. I don't think FHA cares where you sleep at night lol
@Alexa K. Does the FHA care? Yes, they care. FHA offers favorable rates and terms to put people in homes not to benefit investors. Do they enforce it? Yes, they do and often it's the fraudster who trips-up and exposes themselves. You're starting out an investing endeavor with the willful intent to mislead, lie, and/or commit mortgage fraud and insurance fraud, and you've posted it on a public forum. As a landlord, do you care if your potential tenants lie on your lease application? Please rethink your strategy.
@Alexa K. how big is each unit? The FHA does care that you live in it, and not doing so would be mortgage fraud. Maybe you wouldn't get caught, but as Jay said, the penalties are not worth it, even if you were ok with it ethically. However I don't believe you have to live in the unit alone. If it's a two bedroom, get a roommate to help out. Even if it were a one bedroom you may be able to set up a dining room or other area as your bedroom so you can rent the room for a few hundred. It would be tight on space if 1bdrm and require a roommate you like or can at least tolerate. It wouldn't be a legal bedroom to rent to others that way, but two individuals in a one bedroom is common, just usually is a couple or parent and child in the one room. With your parents down the street, you could just bring your necessary items leaving seasonal clothes storage and other things at their place to limit your items needing storage to free up for the paying roommate. The FHA's goal is to put those who wouldn't otherwise qualify for a mortgage into their own home, and it is benefit enough that they extend that assistance up to 4 units. That's a huge benefit in itself so I don't feel it's right to try sidestep the occupancy requirement. No rent from one unit for a year is better than 25% down! After a year if you want to move back home or elsewhere you are free to do so without it being fraud.
