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Is there any disadvantage (or advantage) of owner occupying both units in a 2 family home?

Asked by , 02148 Sun Feb 8, 2009

Is there any disadvantage (or advantage) of owner occupying both units in a 2 family home?

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Rajesh;... and Hi Debontheweb, hope you are doing well this year.

Rajesh, Deb has hit it on the head. Contrary to what one agent has said, a single family occupying two or more units of a multi-family dwelling will NOT change it's legal status in the eyes of the ISD.

If you are a buyer, have your agent verify occupancy (number of units) with the Building Department. Appraisers are also expected to do so as part of their due diligence in writing up an appraisal. It is not uncommon for a property to be known to the tax office as a 2 or 3-family dwelling, when in fact the building department or ISD knows it as a single or 2-family. If a previous owner, with all good intentions, applied to have the number of units revised, for example converting a single family into a two family but never completes the process, the true status remains unchanged. The owner might have gone so far as to pull some permits, added a second or third kitchen and baths. But what gives it away, is that there are one two few electric meters. Hello, can you say SINGLE family. If ISD says single family, it's a single family even if it has been taxed as a two family for decades.

Word of warning to Listing agents. The ISD’s of numerous cities and towns are keeping an eye on our MLS looking for illegal conversions and in-law apartments. Assuming a dwelling with 3 kitchens and 3 full baths is a 3-family when in fact it’s not, could result in a nasty letter to the seller to remove the offending conversion, and a very costly law suit from your ex-client.

Disclaimer: these are just my own opinions and not to construed as fact. Concerns should be addressed with your city or town's Building Department, office of Inspectional Services. Ask to talk with the chief inspector. They set the rules.
Web Reference: http://bartsells.com
0 votes Thank Flag Link Thu Apr 9, 2009

The agents have made some great notes below. To add, you should consider the tax benefits you receive. When you rent the unit you do collect rent, but you also receive benefits of depreciation, write-offs for some expenses related to the rental, and other federal tax related questions.

As a result, this would something you should ask a Certified Public Accountant (CPA).

Good Luck
0 votes Thank Flag Link Fri Mar 13, 2009

It will affect your mortgage not at all, unless you refinance. You may qualify for a slightly better rate than an owner-occupied rental property. But that would probably require you to change the legal status (and as noted that might not be a good idea). Your insurance (usually) would go down, as your agent would probably be comfortable with less liability. Your property taxes could go either way, depending on how the assessor views the change.
Web Reference: http://1timari.info
0 votes Thank Flag Link Thu Mar 12, 2009
contrary to at least one answer given, using your two family as a single family CAN change its legal status in some communities. If the city finds out you're not renting it, it might be able to change the status to a single family legally and you would lose value in the property should you decide to sell. Shouldn't other wise affect insurance costs or mortgage, but changing your taxes to a possibly lower single family status can again possibly change your legal status.
Speak to an attorney who knows the municipal laws in your town before you overtly do this.
Web Reference: http://www.lynnforsale.com
0 votes Thank Flag Link Thu Mar 5, 2009
Hi Rajesh,

Thank you for your question. Owner occupying both units of a 2 family home doesn't change the legal classification of the house. This means there won't be any change to your real estate taxes, mortgage or insurance because the house is still a 2 family home regardless of who's living there. If you are looking to have a change to your real estate taxes etc. you would need to go to the city of Malden and have the house officially changed to a single family home.

There is one advantage of owner occupying both units and that comes when you sell. You'll want to talk to an accountant if you have rented out part of the home at any point or taken depreciation, but owner occupying both units can potentially mean no capital gains when you sell. (Of course, this is only an advantage if you sell the property for a gain.)
Web Reference: http://www.DebOnTheWeb.com
0 votes Thank Flag Link Mon Feb 9, 2009
More specifically, let me know how it affects my mortgage, property taxes and house insurance?
0 votes Thank Flag Link Sun Feb 8, 2009
i.f you occupy both units it becomes a single family home. One owner cannot occupy both units and consider them seperate
0 votes Thank Flag Link Sun Feb 8, 2009
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