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#1525192 - 03/22/11 05:24 PM Is this investment property or not?
City Girl Offline
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Dad and Mom purchasing a home for their son, who is not going to be on the loan. They own five rental units and both have full time jobs. Would this be considered investment property on the commercial side? Or, is it considered personal, family or household on the residential side? Thank you!

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#1525227 - 03/22/11 05:54 PM Re: Is this investment property or not? City Girl
raitchjay Offline
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Unless they're going to rent the home to the son, this sounds like a personal investment to me, with TIL and RESPA applying. From what you supply, it sounds like a gift to the son imho.
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#1525277 - 03/22/11 06:32 PM Re: Is this investment property or not? raitchjay
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You will find differing opinion, CG. We disclose this type of loan as a personal investment. Others, will consider it 'rental' as actually receiving rent is not a necessary condition of the purpose of rental property (I believe that is the opinion of the opposing side!)

Considering the fact that the folks maintain rental property, this is one that could have that intention after the son moves..or the son may be paying rent, as you say.

The purchase, repair or maintenance of rental property has it's on exclusion.

I believe you can go either way and be ok.
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#1525285 - 03/22/11 06:39 PM Re: Is this investment property or not? RR Joker
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I'm not sure i follow RRJ....if i own 25 rent homes and want to buy a home and give it to my son, how would that be exempt from Reg. Z? If i'm gonna rent it to him, sure. I guess i don't get the "receiving rent is not a necessary condition of the purpose of rental property" thing. Using that logic, to me you could say that if i purchase a vacation home for myself, i could call it a rent home because "someday" i might turn it into that. Just want to understand the other side of the argument.
Last edited by raitchjay; 03/22/11 06:41 PM.
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#1525294 - 03/22/11 06:42 PM Re: Is this investment property or not? RR Joker
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purchasing a home for their son, who is not going to be on the loan

If the son will not be on title then what RRJ said. We would treat this as consumer. They are buying the home for their son so IMO there is not a viable argument the loan is not for a personal, household, or family purpose.


If the son is on title then there is no argument. It's consumer.
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#1525300 - 03/22/11 06:47 PM Re: Is this investment property or not? Dan Persfull
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raitchjay, I see where the confusion came in. I think I glanced at YOUR reply "going to rent the home to the son" and thought that was from the original poster! crazy

It does sound like the intent is to buy it for the son...just like a second home...and would definitely be personal, regardless of their track record of buying rental property.

I totally mixed together the first two threads...sorry about that!
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#1525304 - 03/22/11 06:51 PM Re: Is this investment property or not? RR Joker
raitchjay Offline
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I added that on because that was the only scenario i could think of (even though the OP's post didn't even imply renting) that would get it out of Reg. Z in my eyes. wink
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#1525307 - 03/22/11 06:52 PM Re: Is this investment property or not? Dan Persfull
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Jay, there are some that contends the receipt of rent is not a "requirement for the property to be rental property. IOWs they could rent the home to someone for $0. I don't agree with this stance. Especially when the property is specifically being purchased for the benefit of a relative.


Using that logic, to me you could say that if i purchase a vacation home for myself, i could call it a rent home because "someday" i might turn it into that.

You're forgetting the little caveat in Reg. Z that states if you reside in a home for 14 days out of the year (they do not have to be consecutive days) then the property is not non-owner occupied therefore the non-owner occupied rental property exemption is voided.
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#1525314 - 03/22/11 06:58 PM Re: Is this investment property or not? Dan Persfull
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You're right, i wasn't thinking of that. Good point. I guess i should have substituted the scenario where someone like me who doesn't dabble in rent homes, house flipping, etc. buys a house with the intent to sell it somewhere down the road, but has no intent to actually use it.
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#1525333 - 03/22/11 07:07 PM Re: Is this investment property or not? raitchjay
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buys a house with the intent to sell it

Different intent altogether. This has no auto exemption like rental purpose has...this you have to look at harder, see if the person is in that business (like schedule C on their tax returns) and make a decision on true purpose (personal/business)
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#1525339 - 03/22/11 07:12 PM Re: Is this investment property or not? RR Joker
raitchjay Offline
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That was my point: somebody like me who for the first time in his life would be buying a home that i wasn't going to occupy; i think it would be tough to argue that i would meet the business purpose test of Reg. Z, since i would have no history of investing in homes either to sell or rent. I'm saying the argument that rental income "isn't necessary" to prove rental property makes as much sense to me as saying the loan i just described is exempt from Reg. Z as "business purpose".
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#1525357 - 03/22/11 07:21 PM Re: Is this investment property or not? raitchjay
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I don't disagree, raitch...However, if Jane and John Doe came in and put in an application "to buy a 1-4 rental property"...I'd take that at face value.

If they came in and said "I'm going to buy a condo for my son to live in while he's at UGA"...I'd call it personal because I'm quite sure he's not going to be paying rent. wink

Some folks will argue that second one.
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