Owner Occupied 4-plex but Not Actually Living There

9 Replies

I am curious if anyone has any experience with this. I am very interested in looking at getting a duplex, triplex, or 4-plex but my situation wouldn't allow me to actually live in one of the units to get the more borrower friendly loan.

My question is, has anyone ever had someone partner with you on a deal like this just so the other person can live in the unit? They bring no money to the deal, no knowledge of how it really works but they are just there to get the cheaper loan. I have a handful of people who I know who would love some cheap housing so the right pitch could work but I wanted to see if the community had any experience or advice with this idea. 

You have to ask yourself do you have 20 to 27 months to spend in federal prison? That was the 2018 sentencing range.  It's all about intent, technically a partner could satisfy the owner occupation requirement.  But the law looks at the intent of the buyers.  I'm not a lawyer and I don't play one on TV so take this as you want to.  Just my opinion don't ever do anything that even looks like mortgage fraud... ever!

@Clifford Paul

Mainly why I'm asking. The partner would be an owner in the property so I don't really see much of a grey area but I am just not sure. I imagine being up front with the lender would be the wise thing to do. 

@Wayne Brooks

I would only be on the hook for half the loan. My partner would also be a borrower on the loan and would be the one occupying one of the units. Thus owner occupied loan. 

@Adam Rasmussen Yes, even though you are both “on the hook” for 100% of the loan, I’m pretty sure what I said applies. This is commonly done when the occupier can’t qualify by themselves. Verify with your lender.... you still have a “non occupier” person on the title and loan. 

I believe I have heard this is possible Never had experience with it and some loans may not qualify, but generally speaking I believe you can have 1 partner living in the unit and 1 co-owner not living there.

That being said, I believe the law looks at intent as Clifford mentions above. If you give the bank any reason to doubt you, a quick google search of your name leads them to a public forum post where you ask people how to game the system. Not good. While it MAY work, and MAY not get caught, my personal preference would be to steer clear.

It's probably best to get a more expensive Non-QM (non-Qualified Mortgage) loan that allows you the flexibility to a LOT more including this scenario. At some point you grow out of the Conventional Lending space.

@Adam Rasmussen

The occupant will need to qualify for the loan on their own 100%. If they don’t have the funds to close you will need to transfer it to them and let them season for a few months. You can be added to title, but not the loan. If you do this you should have an operating agreement clarifying both parties responsibilities.