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hyukjeen

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Posts: 6
Reply with quote  #1 

I am in the process of refinancing and the broker asked me if I wish to refinance my property as a second home or an investment property.  I was wondering what the pros and cons of each are and in particular what the tax consequences and ability to do 1031 in the future are.  I know that investment properties typically have higher interest rates.  I plan to keep this property for some time and plan to rent it out in the future but apparently I have a choice right now.  Can anyone help?

AlexL

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Reply with quote  #2 

Question number uno: well, what is it?? Is it a 2nd home or investment property??   Are you going to be committing fraud if you show it as a 2nd home??

 

 

rlc

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Reply with quote  #3 

Is that all your broker said?

Didn't your broker explain the differences from a lender's point of view and requirements of each?

 

PS: over time, with some exceptions, you can always change the character of property.

hyukjeen

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Reply with quote  #4 

Thank you for replying.  In response to your questions, I guess I can go either way in terms of using it as a second home or using it as an investment rental property.  I travel a lot and so it would be nice to have a second home to stay at when I'm in town but if I rent it out and can't use it as a second home then I'll just stay at a hotel.  I'm pretty flexible. In fact, I recently sold my primary home and moved in with my fiance out of state.  I am wondering if it's even possible to use this property in question as even a primary residence since there is no primary residence under my name right now?  The lender said no since all my bills and so on are addressed to fiance's house out of state.  That is why I thought perhaps a second home or rental property usage would be good for this property.

 

The broker didn't tell me a whole lot about the differences between the two and so that is why I thought I would ask the experts here.  I know that investment properties have higher rates but if I am able to deduct more expenses than on a second home, it may not matter from a tax perspective...I don't know.  Looking for your advice.

rlc

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Reply with quote  #5 

Generally speaking, a 2nd home usually has to be at least 50 away from your primary residence. Aside from that, the determination (your intent) is at the time of your loan financing.

wayne

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Reply with quote  #6 
Quote:
Originally Posted by AlexL

Question number uno: well, what is it?? Is it a 2nd home or investment property??   Are you going to be committing fraud if you show it as a 2nd home??

 

 

I think brokers are the masters of committing fraud in real estate. I could be wrong on this.

AlexL

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Reply with quote  #7 
Quote:
Originally Posted by wayne

I think brokers are the masters of committing fraud in real estate. I could be wrong on this.

I've seen it going both ways, I'd say it goes 50/50 between brokers and borrowers. I've seen some artwork from borrowers worth of Picasso, only Picasso never painted paychecks.

 

 

rlc

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Reply with quote  #8 

Good brokers play by the rules. I've been doing this for 15 years and a conservative BIG-5 CPA before that. What I previously posted was on the mark. That's the lender's game; not mine.

rlc

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Reply with quote  #9 

Curious.    Why does my computer clock display 8:01pm and my post displays 6:58pm????

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