All Forum Posts by: Cameron C.

I'm closing on my first rental (a house hack) next week, 01/31, and want to sure I'm crossing all my Ts and dotting my Is.  That said, I'd like to establish a repore with my new tenants and introduce a platform that makes the rent payment process easier for all parties.  I'm looking for advice and a suggestion for a rent platform (there's dozens out there!) that you've found simple, cost effective, and user friendly in the past.  I would also like the platform to have tenant screening and other options available so that I can leverage that functionality when having to locate new tenants in the future.  Keep in mind, I'm not looking to spend an arm and a leg to give them this conveince.

Any suggestions out there?

Hey BP, So I just reached an agreement on my 4BR 2.5 bath house in the Southside of Pittsburgh. I've been renting the property for the past 2.5 years and will essentially be turning my roommates into tenants after we close. There has been very minimal wear and tear on the property and I am very good friends with each of my roommates. This is where is obviously get difficult mixing business and friendship but I'm seeking general advice how to handle security deposit (returns) conversations over the next few weeks. Their lease will still be ongoing at the time of closing so it's not something I need an answer to immediately. I want some advice for doing this the fairest way possible. I'm not sure it's fair on my behalf to return the entire thing for tenants that have lived there for 3 years and have caused some minor wear and tear? I had someone suggest to me to potentially make immediate improvements to the living quality (new appliances, furnishings etc) and use their security deposit for that and therefore they would get immediate benefit of their escrowed funds. What're your thoughts? Has anyone had experience with this before? Keep in mind this is not a duplex but rather a SF property.

Thank you Stephanie Irto Glenn D. Brent Coombs I'm having a conversation with another broker this afternoon. I obviously wish this wasn't that difficult and convoluted but here we are! I want him to show me the clause in the mortgage agreement stating why I would be deemed as deceitful if I am TRULY using this as my primary residence. This will be the focus of my conversation with the alternative broker as well. In the meantime, I want to sift through the PA Sales Agreement to see if any of that language is built in as Stephanie Irto mentioned earlier, unless someone else already knows the answer. Thanks guys! This is all great insight! Cam

Stephanie Irto so just to be clear, you think that despite being a primary residence the fact that it is also a current rental might take precedence as it relates to financing?

@Stephanie Medellin and @Chris Mason I just thought of something this morning and would be curious to hear your perspective considering your expertise in lending...

We talk about "intent" and "deceit" as it pertains to mortgage fraud.  I currently rent this property in question.  If, and when, I submit my purchase agreement (which will also be required as part of the mortgage application) I would obvious plan to include language and addendums to ensure that the current landlord transfer all escrowed security deposits and that pro-rated rents be routed to myself with the transfer of the property. 

The question is, would I be incriminating myself as this is 100% my intent from the onset.  I have no interest in hiding that but I wonder if that will then affect me getting approved for financing?  I still have a hard time believing it should matter, and maybe need to look at another lender because of this, but per his definition, I think I would be in violation. 

Your thoughts?

Thank you all for this insight. It certainly aligns to what I've thought all along and I plan to have another conversation with him today. I just want to ensure that nothing can come back to bite me when I show income on my tax returns and that leads back to me collecting income the first month after I close, therefore, maybe one could argue that was my intent all along. I don't think that's even a card you could play though. In no way am I trying to do anything shady. This WILL BE my primary residence. It will just ALSO double as an investment while I occupy it. Whether that would be my intent or not, I just don't understand the logic from the lender.

Well that's exactly it, Kevin Siedlecki I have no intention of skirting the law / evading taxes, which is why I'm doing this extensive due diligence. These are all great answers and I fully want to ensure I understand all the potential scenarios. The other thing that came up today is in the event of a catastrophe, could an insurance company deny coverage because I breached a local occupant ordinance. I don't know that answer and currently have a question out to my insurance agent awaiting a response.

Thank you Dustin S. Kevin Siedlecki Nina Buckley. I couldn't agree with all of you more. I was, and still very confused, why this would be any sort of issue. I was pre-approved for the loan amount long before we even had this conversation and it's a conventional style loan. The only think I would be somewhat curious about is whether or not I should then claim the income on my tax return? If I don't, I'm wondering if I would ever have any basis to enforce the lease if one of my roommates / tenants wanted to stiff me. I would argue those two tick and tie and you'd need to be consistent one way or the other.

Hey BP,

I'll try to keep a long story short.  Currently about to purchase a 4BR 2.5 bath single family that I rent in Pittsburgh and turn my 3 roommates into tenants.  The advantage of this is that it will continue to be my primary residence, however, I will be able to have them pay the mortgage and I will be able to get conventional owner occupancy financing for the deal...or so you would think.

In a recent conversation with my mortgage broker, this came up.  Despite already being pre-approved and almost having a deal in place, we decided to throw out some "what ifs" around.  According to him, you cannot, under any circumstance, collect rent (income) from you primary residence.  I was sure to dig deeper and ask how this would apply to multi-families etc etc, however, he proceeded to tell me if the borrower knew this was his/her intent from the onset that this be disclosed and therefore down payments would need to be of at least 15% because this would be deemed as an "investment".  He went on to explain that this and another situation like say, buying the house today as owner occupied and turning it into a full rental in 3 months would constitute mortgage fraud because of the advantage one could get as it relates to the acquisition of the loan.

I have an extremely hard time believing this considering "house hacking" is such a common strategy across the board.  Could it be that this is lender specific?  For instance, this conversation took place with Quicken.  I'd like to stay away from the big lenders altogether but I've had a great interaction thus far and am being given super competitive rates compared to the smaller, local lenders.

That said, I'm looking for a little guidance and/or perspective as to whether or not this may be an issue for me down the road.  My full intent for this property is to buy it today, live in it and have my 3 roommates pay me rent and then in 2 years move out all together and it to continue as a rental for many years to come. 

Thanks,

Cam

Hey BP,

I moved to Pittsburgh some 2.5 years ago and since have done my taxes through our family accountant (lives in Philadelphia) the past few years.

I'm looking for your help for recommendations for good accountant (can be virtual) that have a good amount of experience with real estate planning and delineating between various forms of income and have the ability to apply this strategy to the large picture. 

Since I hold a full time job (W-2), am a real estate agent on the side (1099), and now want to expedite my personal investing, I want someone who has a diverse background but has experience working with real estate investors that also balance full time jobs. 

I'm already beating myself up with tax questions about a SF home I want to purchase and not sure about the guidance re: to claiming my other 3 roommates (tenants) as income when it is also my primary residence.  It would be great to have a resource on speed dial to address such "what ifs" when they arise. 

Thanks for the help,

Cam