Any Loop Holes for Owner Occupancy?
"There are 2 and 3 family houses that have an ""owner occupied"" clause for certain financing. Of course, one would rent out the extra apartments without question.  The key thing is that owner-occupied means just that, occupancy for tax purposes. Just using a small area like an office won't satisfy the requirement, so no, this isn't legal."
It took me a while to understand the concept, so I'll break it down as best as I can.  There are three parts to the accounting equation: Assets = Liabilities + Owner's Equity We'll look at this in two ways   1. As a business owner you invest (say) 10,000 USD into your bank. The entry would be: Debit: Assets: Cash for 10,000    Credit: Owner's Equity: Contributions for 10,000 In this case, you have assets of 10,000 from your deposit, but it is due to owner contributions and not business transactions. Another example (say a sale):  Debit: Assets: Cash for 10,000    Credit: Owner's Equity: Sales for 10,000 Debit: Assets: Cash for 10,000    Credit: Liabilities: Deposits for 10,000 Deposits are a banking term to reflect a bank's obligation to return the amount on demand (though the bank has free reign with it, see fractional banking)  You will NEVER debit or credit your bank as it is assumed you will be storing your money there, note bank reconciliation. Hope this helps, comment with any more questions. Depending on your income, you may owe AMT instead of the taxes from the regular code.  Even if you don't do that, you may hit the place where you have to at least check if you owe AMT. As you probably know, AMT was established early on to catch the wealthiest of tax payers who were able to use various loop holes in the code to pay much less tax than one would expect.  Over time the limits on AMT have not risen with the rising wage gap, and AMT catches an increasing number of tax payers each year.  If the limit is not raised at all for 2010 then it will catch even more people this year.   AMT has worked it's way into the upper-middle class fairly solidly, especially if you exercise stock options whose strike price is significantly different than the current sale price. I don't trust his analysis.  Further, any composite measure that includes a Black Swan year is *at least potentially* misleading. 2009 was a once in multigenerations event unlikely to be repeated anytime soon.  Since Shiller uses a 10 year historical running average it includes 2009 and is therefore, IMO, unreliable. Making 2009 look even more like an aberration is that the hole had been filled and then some in under 4 years. And a lot of people just don't read. It always throws me for a loop to visit someone's home to see not a single book in the place. But it happens all the time. And that is not a sign of someone who likes to borrow from the library or reads on a tablet. That is someone who just doesn't read. I did this about 8 years ago with a buddy in Chicago for the reasons specified in the original post.  As other posters have suggested, we discussed  a lot of the same questions listed above, figured out the possible scenarios, and then had a lawyer draw up a contract.  We bought a 3 bedroom house, and rented out the 3rd bedroom.  Overall, it was a great experience.  We both built equity while having a renter pay a third of the mortgage.  Plus the property tax and interest on the loan were tax deductible.  Compared with renting an apartment, it made us  a lot more money.  In the end, we sold the house, and split the profits.  Assuming you have the personalities to make it work, I say go for it. Thank you for your response KeithB and Ross. I was researching more about this and looks like I have to follow all these steps (please, correct me if I'm wrong): BLUF:  Continue renting, and work toward financial independence, you can always buy later if your situation changes. Owning the house you live in can be a poor investment.  It is totally dependent on the housing market where you live.  Do the math.  The rumors may have depressed the market to the point where the houses are cheaper to buy.  When you do the estimate, don't forget any homeowners association fees and periodic replacement of the roof, HVAC system and fencing, and money for repairs of plumbing and electrical systems.  Calculate all the replacements as cost over the average lifespan of each system.  And the repairs as an average yearly cost.  Additionally, consider that remodeling will be needful every 20 years or so. There are also intangibles between owning and renting that can tip the scales no matter what the numbers alone say.  Ownership comes with significant opportunity and maintenance costs and is by definition not liquid, but provides stability.  As long as you make your payments, and the government doesn't use imminent domain, you cannot be forced to move.  Renting gives you freedom from paying for maintenance and repairs on the house and the freedom to move with only a lease to break. You're worried about your tenant. That just means you're a nice guy, and it's ok to be nice. At the same time, you can't be expected to lose money on the property or charge well below market on the rent. My suggestions: You know what? She'll totally understand. You've been super nice in keeping the rent low for so many years, and she's been a great tenant, too. At a certain point, inflation kicks in and you have to raise the rent. She'll get that. If she can find a cheaper place, that's a win for both of you. Help her move if you want to be extra nice. Then decide if you want to sell the place or raise the rent. Either option is fine. Listen to your wife. That's just general advice.