I am currently in the process of closing on my first property, a duplex that has both units rented through the End of April.  Working with my lender and looking at my financing options available it appears my best option is a first time home buyer program (https://www.wheda.com/home-buyers/available-progra...) allowing me to only put 5% down.  However, with the first time home buyer program there are certain stipulations one of which is it needs to be my primary residence within 60 days after close.  

With that being the case, in the transfer of ownership of the property can I shorten the duration of the current lease or ask the current tenants to vacate early?    

I would prefer not to have to  make the tenants vacate prior to the agreed upon terms.  Does anyone have any other ideas to get out of this particular stipulation?  How is it determined if that property is my primary residence?   Will two months make a difference? 

Does anyone know of any other Wisconsin loan programs that are still advantageous but wouldn't have this hurdle?    

@Michael Wagner

Check the Tenancy Law for Wisconsin as many jurisdictions permit the early termination of a tenancy if the owner, or an immediate family member, will take-up residence in the unit.  (@Dawn Anastasi  might know for Wisconsin)

https://datcp.wi.gov/Pages/Publications/LandlordTenantGuide.aspx

If you only have 5% to put down, you can't afford to invest. Trust me, living next door to your tenant is not something you will want to do very long. I suggest that you buy the property using conventional financing. The more you put down, the less your debt payment is, and the better the cash flow. Being over-leveraged is no fun when the market turns south. Eventually, you will want to have this property paid off, right?

Originally posted by @Anthony Dooley :

If you only have 5% to put down, you can't afford to invest. Trust me, living next door to your tenant is not something you will want to do very long. I suggest that you buy the property using conventional financing. The more you put down, the less your debt payment is, and the better the cash flow. Being over-leveraged is no fun when the market turns south. Eventually, you will want to have this property paid off, right?

This forum teaches the brrrr method tho. Create value add, then strip most equity out of said property. Im sure it'll be sunshine and unicorns forever in this market. How can the market possibly ever go down? History never repeats itself 😂😂

Thanks for the input!  I understand the implications and risks of putting only 5% down.  The question was not as much about the amount of money I have to invest but rather options and thought on the above scenario.  

I will check out the Tenancy law for my jurisdiction and that guide will be very helpful to have on hand.

Leases almost always remain in effect when ownership transfers.  You might be able to buy out one of the leases, but don't count on it.  Better to find a property that has a vacant unit if you do this approach.

The BRRR approach is different than this. This is "house hacking" where you buy a small multi and live in one unit to take advantage of low-down loans. Not my cup of tea, but folks do make it work. The warning about the risk of being "house poor" is very valid, though. Often the case that first time home buyers get a house only to discover that's only the start of their costs. Any time you hear the phrase "own for the same as renting" you're being lied to. When you're renting and the furnace stops working on the first cold day of the year, you call the landlord. When you own, you pay. No money, no heat. And that list goes on and on. If its just your family in your first house and you can't afford a big expense, maybe you use a space heater or take cold showers until you can scrape up the cash. When a tenant next door, you have no such choice. Whether you're doing house hacking or BRRR, you MUST, MUST, MUST have some cash (or credit) on hand to deal with sudden expenses. Houses have a way of waking up one morning and saying "please insert $2000 to keep playing."

And, yes, I personally think we're in dangerous territory with property values.  Asset values in general, to be honest.

@Michael Wagner , I do not know Wisconsin law, so it may differ from my state.  If you buy a unit knowing there is a lease in effect you are usually bound by it.  If you break it and I were the tenant I would absolutely sue the prior owner and maybe you.  If you really want the house ask the tenant about buying him out or make the offer contingent on having a unit open when you buy it.  

You can set the closing to a later date.

You can ask the seller to empty one of the units and let him figure out how to do that.

You can wait until you find a deal that works for your situation.

Personally, I wouldn't recommend trying to fit a square peg into a round hole.

if the current tenants are month to month either party may terminate tenancy without cause with proper notice

ANY tenant can and will most likely push the envelop in leaving,, If you can't buy a property with at least living space for yourself,,in one of the units,,WAIT

Evictions / non-renewals can and do get complicated.. 

Download  your state landlord tenant laws to know what's required .

People have purchased houses,, and Poof a vagrant moves in over night and they have to deal with evicting thru the legal process just to get into their new house.

SO good rule of thumb is closing day you inspect prior to closing,, have someone camp out in the driveway so nobody else enters till your done with paperwork. Then you ASAP change locks and put a MEAN dog inside till you move in :)

@Michael Wagner , I believe you asked particularly about what constitutes your primary residence.  Your primary residence is your place of address where you spend at least majority of the year.  Your primary residence is usually always reflected by your driver's license as well as federal and state tax returns.  I'm not sure if you could get away with doing the loan and leaving the tenant in there.  Its hard to say if the lender would ever check, but if they did they could call the loan due....but most of the probably won't.  They aren't interested in owning property.  

It depends greatly on your bank, but know first hand it is possible to have the lenders extend the 60 day period. Not sure if it can work with the FHA, others can speak to that.

The bank would have to accept an affidavit from you that you are moving into the property as the primary residence and need to wait until X date to do so due to the tenant having a lease. Even better if you have written evidence of intent to move, giving notice etc.

This is not a long term solution, but for a mostly technical difference of 30 days or so might work. Combo of that and extend closing. Intent matters here. 

Originally posted by @Jon Holdman :

Leases almost always remain in effect when ownership transfers.  You might be able to buy out one of the leases, but don't count on it.  Better to find a property that has a vacant unit if you do this approach.

The BRRR approach is different than this. This is "house hacking" where you buy a small multi and live in one unit to take advantage of low-down loans. Not my cup of tea, but folks do make it work. The warning about the risk of being "house poor" is very valid, though. Often the case that first time home buyers get a house only to discover that's only the start of their costs. Any time you hear the phrase "own for the same as renting" you're being lied to. When you're renting and the furnace stops working on the first cold day of the year, you call the landlord. When you own, you pay. No money, no heat. And that list goes on and on. If its just your family in your first house and you can't afford a big expense, maybe you use a space heater or take cold showers until you can scrape up the cash. When a tenant next door, you have no such choice. Whether you're doing house hacking or BRRR, you MUST, MUST, MUST have some cash (or credit) on hand to deal with sudden expenses. Houses have a way of waking up one morning and saying "please insert $2000 to keep playing."

And, yes, I personally think we're in dangerous territory with property values.  Asset values in general, to be honest.

“please insert $2000 to keep playing. “ 😂😂👌

Sounds like you have cause. You need somewhere to rest your head.

Research!

I encountered this situation specifically.

We put a contigency in for the specific unit we wanted to live in be vacant. The seller bought out the prior tenant  ("cash for keys") and everything worked out. Options our lender proposed if that didn't work out was 30% down 15yr non owner occupied financing + 6mo reserves until vacant and then refinance to owner occupied which we were prepared to do but the former option worked out.

I don't know the legality of cash for keys, but our realtor proposed we put in the contigency and it worked out fine. I'm sure that some tenants may not want to leave and I think you have to be empathetic to that as well and be prepared for alternative financing or move on as suggested