Owner Occupied FHA Multi family

9 Replies


I am looking to make my first purchase and I found a duplex in a great location. Both units are currently rented but in the listing it said possible third unit. The possible third unit would be in the basement which has windows and two walk out doors. My question is, is it possible to qualify for an FHA mortgage as an owner occupant if I am living the third unit of a home that is only listed as a duplex? I am in my mid 20s and do not need anything fancy and do not mind living in the basement. It would be much nicer than any apartment I would get for the same price. The numbers even work out if I was going to move into one of the two units that are currently occupied, but honestly it would break my heart to buy a home and have to displace one of the families that lives there. I have been looking for a multi family home for a while and this is the first one that really caught my interest.

I hope I explained this well enough but please let me know if there are any other details you need to know in order to help me with my problem.

Thank you 


@Chris Puglisi If the county records show it as a duplex, then you have to be living in one of the recognized units to be able to get a OO loan. You can get an investment loan and live in the unregistered area.

You would not want to have a tenant in the unregistered area either, because most locals laws would consider that a violation. And potential you might not be able to hold the tenant responsible for anything even if you have a lease, because the lease would be for a unregistered/unapproved rental unit. Check your local ordinance on this.

Thank you @Upen Patel.  Unfortunately that is the answer I was expected to get.  

Has anyone bought a property where they had to displace one of the tenants in order to move into a unit?  Both tenants want to stay and one has a kid.  As much as I like the house I really would have a difficult time asking one of the tenants to leave. 

@Chris Puglisi You should check the town's records of the basement and check the permits on it.

You can also include the Seller to have one of the units vacant as one of the demands prior to closing the deal. That way you won't have to deal with it yourself.

Thank you for the advise.  Would have never thought to have that as a condition before closing.  Still working on getting a hold of the town.  I called multiple time but the person I need to speak too has not gotten back to me.  Will keep everyone updated.  

You might also want to find out when their leases expire. If you can wait for one of them to expire, purchase the home with both tenants, then tell which ever one you want that they will not have the option to renew, and 60 days prior to their end date to start looking for a new apartment. Pay a local realtor a 1 month fee to assist them in finding a new place if you want.

I am in a similar situation to Chris with my first rental purchase. I have just had my offer accepted on a tri-plex with three tenants. One is month to month. The other two have leases. I would like to rehab and live in the unit that has a lease through December. I close by May 1st (in two months). Can I ask the sellers to ask him to leave? That seems like a mean thing to do to the sellers. Do I need to pay the tenant? Is it true that you CAN break a tenant lease for owner occupation by law? Provided he can find a new place with two months notice, he has only a bed and some personal items so that part should not be hard. I appreciate any thoughts or advice! Thank you!

Just wanted to give a quick updated.  I have been meaning to post for about a month but things have been crazy since I closed on the property.  As part of the agreement we stated that the second floor unit must be vacant.  Luckily it was the tenant that was month to month and there was no issue with them leaving.  I am not sure how it would have worked out if the tenant was on a lease.  Sorry I didn't have that information for you but when you do get an answer please let me know!  

Hi Chris,

Congratulations! A local lawyer recommended cash for keys. I have asked the realtors to request the owner ask the tenant if he would like to be let out of his lease - you never know! But he has no furniture so, if that doesn't work, I'll have to ask the tenant upstairs on a month to month lease to leave. Then I hope the guy downstairs with no furniture will move upstairs. I could just give him a couple hundred off his rent for his trouble. Thank you for sharing!