Unusual Owner Occupied Status--Need Help!

8 Replies

I recently closed on a 4Plex in Anchorage, AK, using an FHA mortgage. I'm in the process of completing renovations and upgrades, and by the time I'm finished I expect to have just over 20% equity in the property. I'm looking ahead to my next move, but have an unusual situation to contend with: my day job as an engineer is with a remote mining operation, where I work 4 weeks at a time and then return home for 2 weeks. This poses a few challenges while also giving me a few opportunities.

What I'm considering now is to:

1. Refinance the FHA mortgage into a conventional mortgage-- owner occupied or investor. I will be living in the property during the refinance, but I'm not sure for how long I would stay.

2. Purchase a lakefront SFH outside the city as a new primary residence, rent out the home as a vacation rental during periods when I am working (while still maintaining it as my sole residence). I do not expect to make any net returns on this property, only to defray my own costs.

3. Eventually move back to the city and into another 4plex, using an FHA mortgage.

My questions are:

1. Would a conventional refinance tie me to remaining an owner occupant in my current 4plex for a longer period? I'm not intending to move the month after refinancing or anything, but are there any hard limits on this or is it lender dependent?

2. How would a conventional mortgage lender look at my use of the SFH? As it would be my only residence while not away at the mine site, is that enough to consider it an owner occupied, or would the vacation rental use while I am away push it to an investment category?

3. How would it change if I "house hacked" a property with a detached guest house/in law apartment? These are fairly common and, as a bachelor, would make an ideal area for me to reserve for personal use while the main home sees both personal and rental use.

4. Would there be any concerns in moving back to Anchorage at a later point and into a 4plex, from a mortgage point of view? I don't know what the timeline would be on this-- likely at least 2 years after moving into the SFH.

Thanks for your inputs, I'm hoping that by thinking of the options now I'll have a better idea of where I want to head when the time comes.

Under FHA, you need to live in the property for 1 year. Unless extenuating circumstances arise: you got a new job our of the area, you have a baby and the property no longer works for you, etc. No need to refinance, but there is a max number of FHA loans you can have. Not a super big issue with investors, but it's there.

If you're refinancing outside of FHA to a conventional loan, it doesn't matter if you live there or not. The loan is treated the same. Living on the property is a stipulation of FHA loans, not mortgages in general.

As far as the SFH and doing a vacation rental, I'm not sure if that is an issue as I'm not familiar with how the FHA loan reads. Most issues I see people have with vacation rentals arise from the area they live in, not the loan itself. Look at your locate laws regarding short term rentals.

You shouldn't have any issues with an in-law suite or guest house. According to FHA, this is still your primary residence, it's just which bedroom are you sleeping in.

And as long as you have no issues with your prior FHA, there should not be any issues moving into another quadplex later.

Thanks for the response! I should have specified, the SFH would be a non-FHA mortgage, and yes, if I don't end up refinancing this FHA mortgage I will be in it at least a year to meet that requirement.

@Tom Schneider it almost sounds like you are describing owning a primary home and a secondary home.  A primary home is one you live in and claim as your home residence.  A secondary home is one that you occupy part of the year.  Often times people think of a second home as a beach house or somewhere that you vacation to for a little while but not to claim as your primary residence.  You can absolutely use a second home for work reasons though.  The reason why we would want to use a second home as an option is that your downpayment is so much lower than an investment property.  Generally, you only need 5% down on a single family home second home.  What do you think?

There is no "second home" for work-- the mining operation runs its own "camp" where I live while on site. Think company provided dormitories/barracks. My current property--the 4plex-- would be completely vacated by me when moving on, with a new renter in place of me.

Hi Tom. 

Here are some ideas for you: research what Airbnb's go for in your area using airdna.co market reports for your zip code. Sometimes it makes sense in our market, sometimes it doesn't with the service fee and bed taxes. Try out your airbnb idea with your current unit before going and buying a SFH for that purpose to see if you like the business and to help set up the systems you will need while running it remotely from camp. FHA has a requirement that you are "upgrading" everytime you purchase. Whether you need more bedrooms or more square footage or a garage, or you want a shorter commute. So, going from a SFH to a 4-plex without getting divorced or something would be a tough sell to the underwriter. Ideally, try to plan your progression like 4-plex -> Triplex -> Duplex -> SFH. Additionally, you may find that the FHA requirements and upfront PMI puts an undue cost on the transaction and are better off just setting up a HELOC after refinancing into the conventional on your first property, then using the HELOC to fund 10 to 15% of the next transaction.

Thanks for the responses so far!

@Connor Dunham , I like the idea about Airbnb with my current unit-- it is located near downtown, so a bit different market, but I'm sure I'll learn plenty about the management side of short term rentals. I've also been in touch with a friend who owns a vacation rental home on the same lake I'm looking at, about 1.5 hrs drive from where I'm currently located. His property is significantly larger than what I'm considering, but getting some good information nonetheless.

When it comes to the "upgrade" side of things, does a change in location make a difference? EG, if I was living at a SFH 60+ miles outside town, while owning a fully rented 4plex in town, would buying into a triplex (or some other sort of upgrade from the 4plex) make the cut because the SFH is in another area?

Yep. Definitely worth looking into the FHA lending rules further. I would say that the case could be made if you had a change of job, but not if you continue working at a remote site. I'm not your lender though so it's worth researching the right way to do it.