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Returning Member

Rentback/leaseback

Hi all! 

 

In a situation where I'm purchasing a house where the seller will need to remain in the house for bout 90 days after closing. 

 

My question is this, I will have a conventional loan yet I've seen articles suggesting leasebacks over 60 days will be considered an investment residence as opposed to a primary residence. This in turn can change mortgage terms and/or increase the rate given conventional loans backed by Fannie/Freddie require the buyer to occupy within 60 days. Is this accurate? 

 

Also, let's assume this is correct I will likely request under 60 days. But in doing so, what impact does this have on my income tax? Do I report as rental income payments received for the leaseback period? Can I deduct expenses? Assuming the mortgage portion itself of the lease back payment won't be able to be deducted where the interest, taxes and insurance will be thus I would have some income tax hit given the entire amount cant be deducted? Or would this not be treated as rental income given its not for profit purposes? If so, how would I record for income taxes if I was to record at all? 

 

Thanks

1 Reply
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Level 3

Rentback/leaseback

As a Realtor doing a "leaseback" is a BAD BAD BAD idea ... you could wind up with squatters who can take months to evict and/or who could damage the property and take months/years in court to get a judgement if you even can get one.    If they need that much more time to move I highly suggest you push back the closing until they can vacate. I highly recommend you seek legal council from a real estate attorney before agreeing to this situation.