Purchasing a second/investment home?

[mathjak107]

the new tax laws this past jan 1 also probley screw that up a little depending on time frame. as which ever home is your primary is the one that may qualify for the 250,000 married tax exclusion 125,000 single.... if you buy a 2nd home ,even if you move into that 2nd home full time that home is now pro-rated as to the tax exclusion....

as an example you live in your primary home 10 years... you had bought a 2nd home or rental 5years after buying the first.... you then sell the first home and make the 2nd your primary.....lets say you sell the 2nd after 10 years of ownership ..... since you owned the 2nd a total of 15 years and its your primary only 10 years you would only get 2/3 the tax exclusion under the new laws .

you can only have 1 owner occupied home if its a rental.... since personal mortgages are based on owner occupied the moment you make one a rental technically that mortgage can be due and called in.


you must depriciate a rental even if you dont want to . you will be charged back when that property is sold and charged with a depreciation recapture that can be in the tens of thousands of dollars whether you took it or not. remember you have to declare the rental income and you deduct your expenses from it unlike a 2nd home.... one of the expenses you can deduct is depreciation... you take the purchase price and capital improvements less the land value and divide by 27.5 years.... thats how much you write off your rental income each year ..... that gets paid back however when you sell as your cost basis is reduced by whatever you deducted whether you took it or not...... people get screwed up here as the declare they rent, subtract all expenses and dont take the depreciation allowance

irs rules say that gets subtracted off your cost basis whether you took it or not and it gets payed back at regular income levels ...since you may be selling at a gain and a big one it may bump your marginal rate higher then you even deducted it at origionally

[Humboldt1]

I have never heard of a bank calling a loan for owner-occupied mortgage after owner moves out so long as payments are made on time. I have done this for the past 3 years with no problems and am looking to buy another property to live in and continue renting out 4 flat I currently live in as well as the townhome I rent out that I lived until 2006.

I make my payments on time. The only problem with my scenario is that I will not be able to refinance as owner-occupied but at 5.25 and 5.5 on 30 year, no PMI (20 percent down for both), why would I want to refinance, though I am thinking of refinancing 5.5 for 4 flat if rates drop to mid 4s while I still occupy the building. I refinanced in Feb 08, going from 6.375 to 5.5.

[mathjak107]

i didnt say they do only that they can, its in almost every agreement as the secondary market generally will only buy owner occupied not investment property mortgages.. the banks just never know about it unless they find out some way