Is it legal to airbnb a owner-occ unit in an owner-occ 4flat?

Question

Hello everyone. Thank you for viewing my post.

I'd like you to consider the following situation: Imagine you own an owner-occ FHA loan 4flat residential, you have the 3 other units rented out to tenants, and 1 owner-occ unit as your legally defined principal address.

Imagine that while that one owner-occ unit may be considered your legally defined principal address wherein it is legally defined that you reside in that unit, in actuality you did not spend your time residing or living within that unit.

Now, I know that renting that unit would be out of the question because it is legally defined as your principal address and is clearly stated that it is owner-occ; however, would it be legally permissible to airbnb this unit? I ask this due to the fact that many people airbnb their principal domicile such as the single family home in which they reside and hold title to.

Parker Dresser · Answer

People are way to freaked out about the owner occupied requirement.  I bought two 4 unit buildings owner occupied and never lived there.  I don't think your bank is going to come to your property and see if you are sleeping there.  Just make your payments and they are happy.

Karen O. · Answer

If your owner occupied unit has more than 1br, what's stopping you from airbnbing the extra br?  It   doesn't change your owner occupied status.

But I'd double check FHA s rules about occupy.

Kevin Romines · Answer

As an ex-lender, I can advise you that lenders have ways of checking to see if your owner occupied? That said, most lenders don't, but get caught saying a property is owner occupied when its not and the most severe punishment is prosecution for loan fraud.

I understand your being anxious to do something as a vacation rental, but I would just ride out the 1 year as owner occupied and then from there, you wont have any issues. Heck, rinse repeat and do it all over again. Max out the number of properties most lenders will allow you to finance then tie the knot. You will have one huge leg up on your investments going into the marriage at that point. It's a thought?

Kudo's for thinking outside the box.......just don't cross lines that will make you regret things later?

Account Closed · Answer

Okay, I get it now.  And I completely understand doing the FHA thing.

So, you want to AirBnB the GF's unit.  Just to be on the safe side, I think she should keep one of the bedrooms in her unit set up as hers - furnished, etc., and at least don't always show it as available to rent on AirBnB.

At least for the 1st year.  No need to take the chance on them banning you from getting future FHA loans.

Good luck in your investing!  You should do very well.  You're clever :-)

Account Closed · Answer

For some reason, I can't understand exactly what the scenario is that you are proposing.

Would you mind breaking it down for me?

Where would the GF live?

Where would you live?

Which units and/or rooms would you rent for AirBnB?

I thought you were going to have a unit you'd use as AirBnB and then go live with your GF in her unit.

But, your last post talked about your GF not living in her unit.

So, are you saying that both of you would be buying owner occupied units and neither of you would live in either of them?

To get a straight answer, you really need to give a straight scenario.

Maybe it's my age?  But, it seems like your questions go around in circles.

Account Closed · Answer

I did not understand all of that.  But, if a person is supposed to be living in a place because they got owner-occupied financing, then they have to live in it for at least a year.

That said, there's no law that I know if that says you can't have roommates in your owner-occupied unit.  And who is to keep you from actually spending all of your time living with your GF?

Same for your GF.  She has her owner-occupied unit, that you happen to spend all of your time at, even though you are "living" with a roommate in your owner-occupied unit.

Hope that made sense.  I'm tired :-)

But, you would not be allowed to get owner-occupied financing, and then immediately start using it as a rental that you did not live in.  There's nothing beyond that.  Doesn't matter if you use it as a storage unit or rent it to someone via whatever website - if you're not living in it, you're breaking the rule.  You might get away with it, but you would be breaking the rule.

But, I think it would be feasible to keep a room in it, and use it as your permanent address, and probably get away with that.  You'd have to do that for a year, as I recall.  But, you could ask one of the lenders about the length of time you'd have to "live" in it.

Account Closed · Answer

Well, you could certainly have roommates, so...keep a room that's yours?

Alexander Kostrubiec · Answer

I apologize if my questions seem difficult to follow, I'll respond to your questions in bulletpoint format to make it easier for anyone to follow.

• Where would the GF live?With me, in my owner-occ unit within my 4flat. My unit would not be designated as her principal address.
• Where would you live?In my owner-occ unit in my 4flat, which would be my principal address.
• Which units and/or rooms would you rent for AirBnB?We would AirBnB rent the owner-occ unit in my girlfriends 4flat, which is her designated principal address.
• I thought you were going to have a unit you'd use as AirBnB and then go live with your GF in her unit.The plan is that my gf and I are both going to take out FHA loans for the low 3.5% minimum downpayment on 4flats. My girlfriend will be living with me in my unit in my 4flat, but her designated unit in her 4flat would essentially be useless to her in terms of residency, since she is already living with me. There is no reason for us to be living apart, so the unit that belongs to her within her building would be essentially useless.
• But, your last post talked about your GF not living in her unit.My gf would not be living in her owner occ unit per se. She would not have tenants within this unit, it is her designated unit.
• So, are you saying that both of you would be buying owner occupied units and neither of you would live in either of them?We would both be purchasing separate owner-occ 4flats with FHA 3.5% minimum down. She would live with me in actuality in my owner-occ unit, but the owner-occ unit in her 4flat would be her principal address. We already live together. The reasoning for purchasing separate units in this manner is that an FHA 3.5% down on a unit uses a lot less capital than 20%+ down on a conventional mortgage on an investment property. We want to start investing as soon as possible, and this seemed like an interesting route.

Alexander Kostrubiec · Answer

I should clarify the situation that I have in mind. I have a girlfriend of 7 years. While we're not married yet, though we plan on marriage. Our goal is to take advantage of our current standing as separate individuals not legally bound to one another and put FHA 3.5% minimum down-payments on an owner-occ 4flat with title held by myself, and a separate owner-occ 4flat with title held by her, so that we can have a start on investing in properties with less overall capital, rather than buying a single FHA 3.5% 4flat and then having to come up with enough capital for a 20%+ downpayment on an investment property. 3.5% of $300,000 is a down payment of $10,500 which is a lot less than 25% of $300,000 for example, which would be a $75,000 down payment.

We would be living together in one of the 4flats. One of the flats would be denoted as her primary residency for all intensive legal purposes, but she wouldn't truly be setting up camp in there. Thusly so, that would mean that in one of the 4flats, the intended owner-occ unit would be essentially useless to us for occupancy purposes. The tenancy/rent would obviously pay off the PITI, and that leaves us with an empty unit that cannot be designated as the legal residency of another persons.

We could use it as a storage area or something like that, but I was thinking if there was anything that can be done within legal limits with an owner-occ unit, such as airbnb, since in airbnb people will "rent" out their primary residencies.

Alexander Kostrubiec · Answer

I understand completely that misrepresenting a non-owner occ property as owner-occ is fraud for property and that mortgage fraud is severely punishable. I don't know what lenders would do to test for occupancy, ring your doorbell? I'd never want to cross any legal boundaries.I'm not certain as to what the exact legal definition of occupancy is in terms of tenancy, but from my point of view, an occupancy would be something that included a leasing contract, payment of utilities, delivery of mail, tenant implements their own furnishings, etc. What if you took a week long vacation every month as the owner-occ, you know? It's quite murky.The reasoning that the airbnb idea seems murky to me is that my girlfriend would be paying for utilities on her unit, she'd receive her mail at her unit, she'd furnish her own unit, legally it'd be her primary residency. If you airbnb'd your unit for a week to someone for 500$ for example there's no revolving lease contract or anything, that doesn't seem like occupancy to me, it seems like a smart move. I'll definitely research a lot more into FHA's stance on occupancy, especially that 1 year occupancy piece of info that I see everybody mentioning around.

Is it legal to airbnb a owner-occ unit in an owner-occ 4flat?

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