Do I need to live in first property for a Loan?

Question

There’s a 4 plex I want to buy, but my realtor seems to think i have to live in the property as a first time home buyer? My numbers work on the property if I have it fully rented out, but if I have to live in one unit I won’t have the cash flow I’m looking for. Do i have to live in it using a traditional loan?

Michael Noto · Answer

@Michael Dodson Check with a local mortgage broker who can tell you the lending options you have available for non-owner occupied 2-4 unit investment properties.

If you are not looking to owner occupy your down payment will just be larger. How much larger? Typically a lender will want 20-25% down for a non-owner occupied investment property as compared to 3.5-5% down for an owner occupied one.

Remember the owner occupied lending programs allow you to purchase for a lot lower down and you only have to live in the property for 1 year. Is the saving 17-20% on the down payment worth living in the property for a year? For some people it is, for some it isn't.

Lien Vuong · Answer

If you're using owner occupied status for loan then you have to live there for the first year. Investor loans you do not. Essentially you would pay yourself the rent, instead of writing the check on the first to a landlord, you would be writing it towards your own mortgage.

Brent Shields · Answer

@Michael Dodson When I started I had no money and my goal was to make my first million, so my mindset was not really to break even or to pay a loan down, I needed to make money much faster than that.

But everyone's goals are different and there is nothing wrong with making some rent money, or paying down a loan,

I would say if your happy with your investment, and it works for you, then just keep doing it.

Andrew B. · Answer

@Michael Dodson

If you live in the property you include the “potential rent” in the analysis because it’s free rent to you, plus it’ll be income when you move out.

Brent Shields · Answer

In real estate you don't have to do anything, it's really just a matter of how much time you want to spend looking for a loan and how much your willing to pay for that loan.

Owner occupied loans will usually be easier and cheaper, but if you find a loan that works for you and it's not owner occupied then go for it.

Michael Dodson · Answer

@Brent Shields how much cash flow do you aim for? Do you go buy the door or property? Do you think it’s ok to break even as long as the mortgage is being paid down and you’re setting money aside for capital expenditures?

Thank you for commenting by the way!

Do I need to live in first property for a Loan?

Do I need to live in first property for a Loan?

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