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Investment Property and Second Homes – What’s The Difference?

By
Real Estate Broker/Owner with KGC Properties LLC, Tucson Property Management & Real Estate

Getting several calls from potential buyers who see statements such as:  “Owner occupied only for 15 days”, “First Look initiative for 10 days”, etc.,  in MLS remarks or on certain listings that qualify for HomePath or are HUD properties.

“What does that mean?”  It means that only offers from those intending to live in the home as their primary residence will be looked at.  That is generally followed with questions such as, “What if I eventually intend to live in it – or does it count if it’s a second home?”

The answer remains – unless you intend to live in the home year round as your primary residence – you do not qualify for owner-occupied status.  So, as a non-owner occupied buyer – you become an investor or second home purchaser. 

The difference between investment property and second homes:

Investment property purchases: Non-owner occupied - you aren’t going to live in it at any time during the year, rather will be renting it for the sole purpose of generating income.   It doesn’t matter if it’s in another state or next door – you are an investor if you rent a home on a long term lease.

Second homes and/or vacation Home.  A second home is anything other than your primary residence that you plan to occupy sometime in every year. It doesn’t matter how long you plan to stay in it - the key is that you do not plan to rent it out to for the sole purpose of producing income. You can still rent it out, for instance like a beach home during the summer months, but not for long-term occupancy. Also, second homes have to be at least 50 miles away from your primary residence.

One additional point – some folks submit offers on owner only homes regardless. Two things to keep in mind – banks and agents can figure out occupancy intent easily; and if they can’t, at some point you and your realtor will have to sign a “I certify I am going to live in the home” document that generally comes with a $10,000 fine if it’s signed knowing that statement is false. 

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Buying or selling Tucson real estate, Mt Lemmon, Tucson bank-owned homes, Tucson rental homes, or Tucson lease option homes? Visit www.KGCPropertiesLLC.com .

                                                 

 

This blog is written with my opinions and my opinions are  presented with accuracy but not guarantees. Please talk to a professional before making any real estate, financial or agency decisions.    Gabrielle Kamahele Rhind - 2014. If you want to reprint parts of this - just email me for my permission: KGCProperties@gmail.com .

 

Comments(9)

Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247

I think you were correct in the assumption that the consumer is confused on the difference.  This will help.

May 06, 2012 10:48 PM
Erv Fleishman
Realty Associates - Boca Raton, FL
Luxury Prop Specialist Realty Associates

Remember, there is a difference on financing these. That is important to consider. Sometimes a second home is also an investment. Insuring these homes may also be different so take that into consideration. 

May 06, 2012 10:49 PM
Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

Gabrielle, great explanations of these occupancy definitions by potential homeowners. Of course some loans are only approved for full occupancy by a new buyer or they have to stay in it a number of years.

May 06, 2012 10:50 PM
Jon Eliason
EXIT Realty Advantage Pagosa, Pagosa Springs, Colorado - Pagosa Springs, CO

Gabrielle ~ This is a great post showing the differences between a second home and in income producing investment property. Long term rentals, usually will give it away.

May 06, 2012 10:52 PM
Barbara Todaro
RE/MAX Executive Realty - Happily Retired - Franklin, MA
Previously Affiliated with The Todaro Team

Good morning, Gab.... another good piece of information for those who are thinking of not being up front with their intentions.... they'll always get caught.

May 06, 2012 10:52 PM
Sheila Anderson
Referral Group Incorporated - East Brunswick, NJ
The Real Estate Whisperer Who Listens 732-715-1133

Good morning Gabrielle. Great post and important distinction. I appreciate the information simply and well stated.

May 06, 2012 11:17 PM
Paul S. Henderson, REALTOR®, CRS
Fathom Realty Washington LLC - Tacoma, WA
South Puget Sound Washington Agent/Broker!

Great explanation! We do have to be careful that an investor doesn't become fraudulent by claiming full occupancy and never inhabits said property... 

May 07, 2012 08:54 AM
James Dray
Fathom Realty - Bentonville, AR

Morning Gabrielle it's going to be a great day and this is a good post.  Maybe someone will get the idea they can't dance around the law.

May 07, 2012 08:10 PM
June Piper-Brandon
Coldwell Banker Realty - Columbia, MD
Creating Generational Wealth Through Homeownership

Gabrielle, this is great information and I have shared it with my readership as well. 

May 15, 2012 01:24 PM