Can I rent from myself?

Question

Can I rent from myself? I'm trying to get creative with financing a rental. If this isn't legal, I don't want to do it.

Here is my hypothetical situation:

• I buy a 4BR, single-family home in a college town near my job, with an FHA loan.
• I move in permanently and meet all of the requirements of the FHA loan.
• Myself and 3 college students sign a lease each year to rent the house.
• I rent from myself, and the 3 others rent from me too.
• All 4 of us split the utility and rent costs.
• This is in NJ, where it is illegal to rent by room without a state permit (NJAC § 5:27-1.6).
• Additionally, it is ILLEGAL to rent by ROOM in the township in this particular zone, but it is LEGAL to rent by HOUSE.
• I get the proper municipal landlord permit for the home.
• I do everything properly when I do my taxes.

Has anyone done something like this before? I'd like some input as I try to get more answers.

Adam B. · Answer

I see, that makes sense, thank you. I will have to keep doing research and probably ask an attorney.

Dave Toelkes · Answer

@Adam B.,

FHA loans are only given to owner occupant homeowners, not to business entities.

Adam B. · Answer

Alexander - To collect rent to pay for the housing expenses.

Aaron - The idea of buying the home in an LLC sounds like it might be on the right track. I'd have to see if that is appropriate with FHA loans, thanks.

Matthew - Thanks, your answer is helpful. I plan to do that. I was looking for a well backed-up "no" answer for free before I go speak to an attorney.

Matthew Kreitzer · Answer

This isn't an area of law that I'm particularly familiar with, but it doesn't pass the smell test unless there are significant provisions in the lease to conform with local laws. I'd meet with a local, licensed Real Estate attorney (NOT landlord/tenant) to discuss this particular issue. Answer will be highly fact specific and based on local law.

Aaron K. · Answer

If I understand correctly, you're trying to find a way for your friends to pay you rent to live in your house, but in your town you're only allowed to rent the entire house, and not individual rooms.  That would mean that as the owner, you couldn't live there and rent the whole house to other people tat the same time.

If that's the scenario, what about putting the house in an LLC?  Then you can live there as a tenant of your LLC, along with your friends.

I have no idea if this is legal or recommended in this situation, and/or in your area, but something to think about?

Alexander Felice · Answer

What benefit to you expect to gain?