Owner occupied if I have my mother live there?

6 Replies

We need to move my mother out of her rental because the place is falling apart (really bad landlord). She's been there for over a decade and she pays so little rent that it's hard to find a place that we wont have to subsidize her rent which I'd rather not do. Another option we're throwing around is buying a mult-family and having her in one side while we rent the other to at least try and break even. My main question is if we have her on the title could this property could as owner occupied and get the benefits that come with it even if we're paying all the money down/monthly? What other flaws do you see in this besides the "working with family" aspect?

Well, of course, talk to an account or tax attorney to get a useful answer. If she is an owner then it seems to me that it would be owner occupied. Now if she is on title then does she have to be on the mortgage as well? Would she qualify to be on the mortgage? Also, when you get income how do you split that up from a tax perspective? When you sell would only her part of the capital gain be tax free but yours would not due to you not having lived there. 

Personally, this sounds like increased complexity for not much benefit. 

So it would be easier for us to just own it and collect rent from her and another tenant? The benefits of owner occupied would not outweigh the hassle I'm guessing?

Also, would this be a better plan than renting, basically giving her $600/m to help her pay the rent which just seems like a bad idea to me.

Please talk to a competent CPA about the level of subsidizing you do and whether she might qualify as your tax dependent.  If you structure this appropriately, both of you could end up with a pretty favorable tax structure.

Yes, mom must be on title, but she doesn't have to be on the note and she will sign the deed of trust or mortgage grating the security interest. 

Mom can be a co-borrower as well. 

As to the business side, the family can figure that out. :)

I've been looking more into this. We need FHA for this to work in our area since prices are high but there are properties that would cash flow. The ideal situation would be to buy a triplex, haver her move in one side so it's owner occupied and then rent out the other two. Hopefully the rents from the other two cover hers as well.

How would I find out for sure if I can do an FHA loan if she's not on the note but on the deed? I have 800+ credit, she probably has 600ish so ideally I'm the only one on the note.

@Ryan Detzel  For an FHA it has to be OO. There can be a non-occupant co-borrower. So you and your mom can buy the property, she will have to be on the loan and title, but you can be the one putting up most of the money.

You will have to get an accountant/CPA to tell you how things will be treated with regards to tax benefit, at sales, etc.

Upen Patel, Mortgage Banker

Federal NMLS# 1374243

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