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

Reblogger June Piper-Brandon
Real Estate Agent with Remax New Beginnings ---------- and ------------- Ashland Auction Group MD RE License 579412

With so many great deals on the market now some investor's are really pushing their luck with the occupancy rules.  Buyer's and Agent's alike need to be extremely careful with the occupancy requirements on short sales and foreclosures.  The other thing you need to be really vigilent about is "Arms Length".  If you are in doubt, ask someone who should know or seek the advice of a good attorney.


Original content by Gabrielle Kamahele Rhind

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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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 - 2011. If you want to reprint parts of this - just email me for my permission:


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Eric Peltier
Eric Peltier - Premier Mortgage Group - Boulder Colorado - Boulder, CO
Mortgage Lender in Boulder CO

Good advice.  Underwriters do a little test: "do I picture this borrower using this as a 2nd home?"

Sometimes, this does not work out well.   I had a person call me a couple years ago.  They were shopping for a refi on their 2nd home in Boulder CO.  They lived in Aspen CO.  They had been turned down by another lender.  I had the person send over all their docs.  They included a copy of the Appraisal the other Lender had ordered.

Her's the way it looked.  The Borrower lived in a $3,000,000 townhome in Aspen.  Very sleek and modern.  The 2nd home was a typical 3-bed 1.5 bath ranch in Boulder CO that was near the CU campus.  It was not looking plausible.

Then I opened the Appraisal.  The darn house was run-down, and HAD A COUCH ON THE FRONT LAWN.

This was not going to pass the Underwriter's test.  I turned her away because she REALLY wanted a 2nd home loan, not an investment loan.  Sorry (but not really)

May 15, 2012 01:55 PM #1
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June Piper-Brandon

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