Spouses living separately and house hacking finance options?

Question

Hello BP Community!

Longtime follower, first time poster, but have an interesting question/situation I’m potentially looking to pursue.

Current situation:

My wife and I have our primary residence in NW Wisconsin (both names on the loan) that is still in FHA only for a short while longer.

I work as a regional sales manager, with my territory covering the entire state of WI. My office that I report out of, is located in Illinois, not too far from the WI/IL border. Most of my customers and prospects are between the Madison and Milwaukee, WI surrounding areas (southeastern Wisconsin, 4-5 hours drive from current primary residence) in addition to the Illinois office I frequent on occasion. I currently spend anywhere from 2-3 nights a week on the road in hotels in this area.

The question is:

Can I start my real estate investing career by house hacking a new duplex as my primary residence, using a 5% down conventional loan, in the area I work (let’s say Madison, WI)? I would live here the required amount needed to maintain full time residency and rent out the additional unit.

Looking for financing input/thoughts to make this happen! Thanks!

Drew Sygit · Answer

"that is still in FHA only for a short while longer."

So, if you are going to refinance the current primary, refi to a nonFHA loan, primary residence, only in your wife's name.

This will then allow you to use FHA loan to buy a duplex in your name only as a primay residence.

Standard mortgage requirement is you MUST owner-occupy at least one unit of a property for at least 12 months.

It's a federal crime to commit mortgage fraud, so recommend you and your wife actually owner-occupy each property as you've indicated - change your driver's license, your address with your company, report on your income taxes (you may have to file Married Filing Separately), etc.

Marcus Auerbach · Answer

Yes you can buy a primary. Most lenders don't offer a 5% down conventional, but it can be done with a portfolio loan. We do a lot of them in Milwaukee.

Zack Karp · Answer

@Michael B. the short answer is yes, you can buy a primary residence separately from your spouse.  There is no law that says that spouses must live together.  Especially due to work travel.

However, Conventional financing does not allow 5% down for a 2-unit.  You would need 15% down for a 2-unit, or 20% down for a 3-4 unit.  There is a Conventional program called Home Possible that used to allow 5% down for a 2-4 unit, but that was nerfed earlier this year.

But you're in luck.  If you are relocating more than 100 miles away from your current home (which it sounds like you are), then you can buy another property with FHA and only need to put 3.5% down.  That's one of the only ways to have a second FHA loan at a time, without having to refi the existing FHA loan.

If you need any help navigating this, feel free to reach out.  You may find resistance on this strategy if you are not working with the right LO/lender on this.

Best of luck!

Nathan Noordhoek · Answer

@Michael B.

Something to consider… every new investor I’ve spoken to looking for real estate in Madison, WI, is looking to house hack a duplex in Madison. I suggest extending your search outside of Madison.

Jacob Walter · Answer

@Michael B.

Hey Michael, you should be able to have a duplex that is that far away be considered a second home (primary residence) without an issue, especially when there is a perfectly logical reason for it. With that being said I could not answer if a bank would be willing to lend with only 5 percent down.

I would love to connect when you are the area! I am the head of accounting for a Property investment and management company out of Waunakee Wi.