Author Topic: Options on buying a second home  (Read 2171 times)

acernigra

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Options on buying a second home
« on: September 26, 2014, 03:38:27 AM »
Hi all,

I have an interesting situation here and I'm hoping you all could give me some advice.  My wife and I live overseas and found a property we've fallen in love with back in our home-state where my wife has return rights to her previous job. We want to buy the house now to make sure we don't lose it, but we can't move back to live in it for at least a year.  We can get it as a "second home" and avoid the investment property mortgage rates, but does anyone know how we could cover the mortgage until we move back?  We can't rent it for more than 14 days I see...but does anyone know if we could let it be used for agricultural purposes until then?  Yes, it is a farm...  Or does anyone else have any ideas or knowledge about this kind of thing?  I have been doing some research but I thought I would go ahead and reach out to you guys since there are always so many good ideas on here.

Thanks so much for help!

johnhenry

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Re: Options on buying a second home
« Reply #1 on: September 26, 2014, 10:31:52 AM »
Hi all,

I have an interesting situation here and I'm hoping you all could give me some advice.  My wife and I live overseas and found a property we've fallen in love with back in our home-state where my wife has return rights to her previous job. We want to buy the house now to make sure we don't lose it, but we can't move back to live in it for at least a year.  We can get it as a "second home" and avoid the investment property mortgage rates, but does anyone know how we could cover the mortgage until we move back?  We can't rent it for more than 14 days I see...but does anyone know if we could let it be used for agricultural purposes until then?  Yes, it is a farm...  Or does anyone else have any ideas or knowledge about this kind of thing?  I have been doing some research but I thought I would go ahead and reach out to you guys since there are always so many good ideas on here.

Thanks so much for help!

What entity is imposing the 14-day rental restriction?  You may be required by the IRS to list it as an investment (Schedule E) and not a second home if you rent it more than 14 days.  But I don't see why that should throw a wrench in your plan to buy or dissuade you from renting it.  Are you saying that your mortgage lender is imposing that restriction?  I wasn't aware of that requirement by lenders.  If it was common every homeowner who moved out and rented their former residence would be forced to re-finance.  I don't know of any regulation that would motivate you to keep it empty until you returned to use it.

Whether it makes sense financially to use this as a rental is another question.  As long as the potentially negative/poor cash flow of a RE investment is worth the value of obtaining this property for future use, there's no reason to avoid it.

AJ

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Re: Options on buying a second home
« Reply #2 on: September 26, 2014, 10:39:25 AM »
What entity is imposing the 14-day rental restriction?  You may be required by the IRS to list it as an investment (Schedule E) and not a second home if you rent it more than 14 days.  But I don't see why that should throw a wrench in your plan to buy or dissuade you from renting it.  Are you saying that your mortgage lender is imposing that restriction?  I wasn't aware of that requirement by lenders.  If it was common every homeowner who moved out and rented their former residence would be forced to re-finance.  I don't know of any regulation that would motivate you to keep it empty until you returned to use it.

Yes, to obtain the lower rates granted to owner-occupants, lenders will require that you sign a statement saying you will not rent the house out for a period of time, typically 1-2 years. If you buy a primary residence (as opposed to second home), they will also require you live there. That is how people can rent out their old homes - they've lived in them log enough to be past that period. I know someone who tried to do this very thing (buy a "second home" and rent it until they were ready to live in it) and ran afoul with the lender and the IRS. They do followup, apparently. If you really want the place, I think your choices are buy is as a second home and pay two mortgages or buy it as a rental and pay the slightly higher rate.

escolegrove

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Re: Options on buying a second home
« Reply #3 on: October 04, 2014, 01:45:58 AM »
I agree with AJ. My husband is active duty military and we looked into buying a house in an area we would love to eventually end up. Unfortunately if it is a second home you cannot rent it out within the first year and you have to cover the different. If it is a investment than you have the higher interest rate and downpayment requirements. This way you could rent it out till you come back.

Crazy question, is the house own outright by the current owner? Could you do owner financing for the year it will be an investment property and than remortgage it when you move into it at primary rates. Just an out of the box thought! Good Luck!