Owner Occupant in a Multifamily Home Questions

[Matt Rothwell]

My long term goal as an investor is to have several multifamily homes providing me with a solid amount of cashflow. Right now, I have nothing, but you've got to start somewhere, right?

I originally wanted to do an owner occupant situation in something like a quad. I was looking for something just a little shabby that could use a bit of landscaping, painting, maybe a light fixture here are there. I would do the fix-up while living there and move from unit to unit getting the place looking fresh as leases ended/tenants moved out. Good plan, right? Well what I'm finding is that most multifamily homes in the areas I'm comfortable with are either (a) fully rented or (b) fully empty. Most of the fully empty places are essentially uninhabitable (aka no way I'm getting the girlfriend to live there) due to missing windows/doors, leaky roofs, vermin, etc.

Now the main reason I'm searching for an owner-occupant situation is for the financing. I don't really need a place to live, I'm renting an okay apartment with 8 months left on the lease. Could I buy one of the uninhabitable houses, be an "owner occupant" with FHA financing while I fix it up, then move in when I'm done? Is this illegal?

My other option is to maybe expand my search area a bit. The disadvantage here is that my commute to my 9-5 would probably be increased, and I'm not really liking the idea of that. If I were to find a quad with one empty unit, finance it with an FHA loan and keep at least one unit at a time as my residence on the weekends (probably just to do work on the place), would I be committing mortgage fraud?

Anyways, sorry about the long post. For the "TL:DR" crowd (not sure if that exists on this forum), I'm basically trying to find out what the minimum requirements to be an "owner-occupant" are.

[Brandon Turner]

Hey Matt Rothwell I think your plan is solid, and I'm a huge fan of that strategy. You could buy one that is already fully rented, and just make it a condition that one of the units needs to be empty. Make the seller get rid of someone. OR one thing you could do - get on of the Ugly ones and do a 203K loan - which is a government backed loan that allows you to incorporate the fix up costs into the price you pay for the property. So if you find one for $100k and it needs $40k worth of work, you can get a loan for $140k and just pay 3.5% of the total. It's a pain in the neck, and being a government loan there are a lot of rules and red tape - but if it can give you a huge step up and some equity/cash flow - i'd do it.

Good luck!