My company is relocating me to Southern California and I own a house with a FHA loan. I refinanced the loan 6 months ago. What can I do? Rent/Sell?

Asked by Nielsen, P, Elk Grove, CA Sun Jun 20, 2010

I purchased this house back in 2008 with a FHA loan and refinanced the FHA loan in December of 2009. I am aware of the 12 month owner-occupancy rule but I am wondering if there are exceptions that would allow me to rent out the house instead of selling. I've put over 6k in upgrades to house and If I sell it, more then likely A: I'll be upside down with the house value, B: lose all the money I have invested into the house, C: and get stuck with paying back the full 7k fed. refund I received when I bought the house.
The relocation is about 7 hours away.

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Sue Archer R…, Agent, Palm Harbor, FL
Sun Jun 20, 2010
I believe your question on the 12 month owner-occupancy rule is most relative to your qualification for the 7K tax refund. That can best be answered by your tax preparer. And I suggest you use one rather than H&R Block type of organization...but that's another discussion. Have a qualified CPA read your tax returns and advise you, if they hadn't prepared them prior.

Your tax preparer can also help you determine if it makes sense to rent your home out or sell it. If you make over $125K, the IRS has removed your ability to write off up to $25K in passive losses (i.e. depreciation, etc.) on rental properties that you used to have. However, depending on your overall plans it might still make sense to rent the home out ...or not.

It also depends on your plan to buy in Southern CA or not. You must qualify for payment on both of the homes in order to qualify for a home loan. To avoid 'buy and bail' fraud activities, lenders will not accept the idea that you plan on renting the Elk Grove home out...unless you qualify for payments on BOTH homes simultaneously. So you may want to talk to a lender to determine your level of qualification.

You may also consider renting in Southern CA, until you can sort this all out as well. Find a solid property manager to handle your rental here, if you decide to rent it out. But I ALWAYS advise you visit the potential tenant where they live now to really determine their abiltiy to maintain your home in good condition. (your property manager won't do that.) How they spell 'clean' may not be up to your standards when you see how they live.
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Kevin Nakano, Agent, Elk Grove, CA
Sun Jun 20, 2010
I would suggest talking with a few people:
1) Lender - I suggest you call your lender to discuss your scenario. There may be an exception to the one year occupancy rule if you're relocation because of a job, but your lender would be able to provide you with a definitive answer you can rely on.
2) Income Tax Credit - I would recommend that you call your income tax preparer regarding the income tax credit and what would be required if your moved out of your home.
3) Renting - If you end up renting your home, you should be sure you hire an experienced, established and ethical property managment company. If you need a referral, call me. I have a good one that I've referred many clients and friends to.
4) Selling - I've helped clients sell their home when they're relocating. In some situations, the employer will pay the difference. In other situations, you would have to short sell the property if you're under water.

If you have any addtional questions, feel free to contact me. Congratulations on the new job!

Kevin Nakano
Nakano Realty
Certified Distressed Property Expert & Realtor
(916) 235-9110
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