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House Hacking

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Armando Carrera
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FHA House hacking risks?

Armando Carrera
Posted Jun 19 2023, 14:50

Hi everyone,

Im trying to figure/find out how strict the rules are when it comes to getting an FHA loan (I want the minimum down payment) and renting it right away. Ive read that you must occupy the home at least 1 year before you can rent it out as an investment.

Have you guys tried renting the home out immediately after closing escrow? Have any of you gotten in trouble for doing this? 

I want to purchase another investment home but dont really want to house hack...

Thank you

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Josh Young
  • Rental Property Investor / REALTOR® / Property Manager
  • Gilbert, AZ
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Josh Young
  • Rental Property Investor / REALTOR® / Property Manager
  • Gilbert, AZ
Replied Jun 19 2023, 15:29

@Armando Carrera what you are talking about is mortgage fraud and it’s a felony that could send you to prison. 

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Armando Carrera
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Armando Carrera
Replied Jun 19 2023, 15:33
Quote from @Josh Young:

@Armando Carrera what you are talking about is mortgage fraud and it’s a felony that could send you to prison. 


 Hi Josh,

Appreciate the quick response. I dont want to commit a felony or fraud or even less go to prison. I will totally not ever consider such an idea...

Thank you!

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Jason Wray
Pro Member
  • Banker
  • Nationwide
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Jason Wray
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  • Nationwide
Replied Jun 19 2023, 15:38

Armando,

The best way to avoid issues is to buy a Multifamily (2-4 Unit) as your primmary with 3.5% down. Then in 6 months refinance into a conventional loan and you can exit the property legally. There are certain factors that need to be met like LTV. If you focus on a fixer upper you can renovate in 6 months and refinance on the ARV.

You only need to be at a 85% LTV to refinance and its not hard to build 15% equity in a property in this market enviroment. There are a few other options as well that can be taken to escape the FHA to Conv. 12 month rule.

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Christopher Jason Lloyd
  • Investor
  • Newport News, VA
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Christopher Jason Lloyd
  • Investor
  • Newport News, VA
Replied Jun 19 2023, 16:59

That would be mortgage fraud and a felony. Basically, you're saying your intent is not to move in, but with owner-occupant loans for lower downpayments, you will sign a statement certifying your intent is to occupy the property. It also puts your agent and lender in a tough spot where it could be a perceived "fraud for profit" and they could lose their license and face time/penalties if they knowingly cooperate. (I am not a lawyer so none of this is legal advice but have seen similar situations occur). If you want a lower downpayment way of investing without moving into the property, I recommend the BRRRR method. Will take a lot more learning than the househack, but its legal. Connect with local wholesalers, partners, hardmoney lenders and DSCR lenders and familiarize yourself with real estate contracts.

  • Real Estate Agent VA (#0225254468)

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Michael Brattelli
  • Real Estate Broker
  • Medford, NJ
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Michael Brattelli
  • Real Estate Broker
  • Medford, NJ
Replied Jun 20 2023, 06:11

@Armando Carrera as others said above that's mortgage fraud and not at all what an FHA loan is for. Save up more capital and buy an investment property or just house hack for a year. 1 year really isn't that long and flies by pretty quick. Just suck it up in the short term and reap the benefits in the future.

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Armando Carrera
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Armando Carrera
Replied Jun 20 2023, 08:25
Quote from @Michael Brattelli:

@Armando Carrera as others said above that's mortgage fraud and not at all what an FHA loan is for. Save up more capital and buy an investment property or just house hack for a year. 1 year really isn't that long and flies by pretty quick. Just suck it up in the short term and reap the benefits in the future.


 Hi Michael 

I hear you (and everyone else), I have well over the necessary 20% down in the market I’m interested in. I just really didn’t want to use it up since I have other plans as well. 
thank you all

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Benjamin Sulka#3 House Hacking Contributor
  • Cleveland, OH
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Benjamin Sulka#3 House Hacking Contributor
  • Cleveland, OH
Replied Oct 2 2023, 06:47

Armando, 

Do a house hack with 3.5-5% and live in the property for a year, build some equity, and you'll have a full scale rental when you move out. 

Real estate is a long term wealth building strategy and in that one year you can learn a lot about home improvement and land lording. 

You'll be able to maintain most of your capital and you'll learn a lot of useful skills. 

I know this post is from 3 months ago but this is my 2 cents. I hope you've been successful! 

All the best!