Loan for a house

7 Replies

Hello BP, i have been thinking about buying a house and was thinking about loans, i was wondering how it is where you live in the united states with houses, are they consindered as a private house with different rent, money & loans than if you would buy a comercial 10 unit apartment ??

Or is a residential house consindered as a comercial asap your purpose is to buy it for investing and rent it out?

Here in sweden, we have different typecodes for example, a residential house is "small house" and get something around 200 and u get to detuct 2% each year of the buildings value of what you paid for it meanwhile a rental property have a typecode around 300 and u get 3% each year instead of 2% to deduct-----> Question 1: Can i buy a house and make the bank/irs look at my property as a rental property instead of "small house" ? How is it for you in the US or other states?

Q 2: How do the IRS look at houses when you buy them for investing & renting out purposes?

Q 3: How will the bank look at the property when i come to them for a loan/what kind of loans do/can i get?

Thanks, Rikard.

@Rikard Lorén

A rental property is known as a business as you put it on a schedule C or E of your annual tax return.  This is different than your primary residence, unless you're renting out rooms in your own house.

Loans for owner-occupied houses have lower down payments than loans for rental properties.

@Rikard Lorén  

Question 1: Can i buy a house and make the bank/irs look at my property as a rental property instead of "small house" ? How is it for you in the US or other states?

The bank: Anything under 4 units are considered a residential property, and can be financed using residential mortgages. The IRS doesn't care what you use the property for. The bank give you a better interest rate if you use the property or one unit of the property as a primary residence. If you are only buying it to rent out, you can take a residential mortgage for an investment property and will have higher interest rates for your loan, along with other requirements like 6 months reserve for mortgage payment, insurance, property taxes.

Q 2: How do the IRS look at houses when you buy them for investing & renting out purposes?

You report as personal income, either positive (hopefully, that is the point) or negative (hopefully not), generally your expenses (mortgage, taxes, repairs and maintenance, paperwork, etc.) are deducted from the rent you collect.

IF you buy and flip and sell, you will need to pay capital gains taxes.

Q 3: How will the bank look at the property when i come to them for a loan/what kind of loans do/can i get?

The property will have to be financable. Everything has to generally work. They will then appraise it using a third party to get fair market value, making sure you are not overpaying for the property, and that your numbers are good with good rent estimates. You will usually get preapprovals from banks before you make offers. The bank will look at your situation and decide how much they are willing to lend to you. I am not sure how this works with a foreign investor.

See Q1 for the kinds of loans.

Have fun and good luck hunting.

Hi again, would your answers on my questions change if I mentioned ( forgot before ) that I will buy the house through a LLC ?

@Rikard Lorén yes, though in your case not as much as US citizens. US citizens can get "conventional loans" for properties up to four units. Conventional loans are 30 year fixed rate, fully amortized loans. But you can only get those in your own name, not an LLC. If you want your LLC to be the borrower you're going to get a "commercial" type loan. Those are available from a small number of lenders, typically smaller banks and credit unions. Those typically are, at best, shorter terms, say 15-20 years max. They may also have balloons or ARM (adjustable rate) terms

However, as a non-US has a hard time borrowing here period.  You will have to do some searching to find a lender and won't get as attractive terms as conventional loans.

Okey, thank you all, Dawn Anastasi, Nazz Wang & Jon Holdman for your answers on my questions, clearefied it for me, thank you :)

Hhmmm, i have checked this post again and got another question:

Do you buy your houses in a LLC or private and why?

Late reply here but just browsing.  The US mortgage market is heavily regulated.

Personally speaking the only properties I own in a LLC are those which I have purchased through commercial ("business") loans. If you obtain a "standard" mortgage here in the US (for 1-4 unit-type properties) they are highly regulated financial products. Generally they won't let you buy the property financed with such a loan in a LLC.

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