<p>I own a 4 family building. My family occupies one of the units and I rent out the remaining 3 units. I file a Schedule E form and write-off 75% of my building expenses(mortgage, tax, insurance, utilities). I usually end up with a small loss ($1500) to small gain($2000). I have a 1st mortgage and a line of credit(with no available credit).</p>
<p>Is an owner-occupied building treated differently than non-owner occupied for FA determinations? I realize that it is an asset, however, it’s kinda impossible to sell/liquidate this asset without selling the primary residence.</p>
<p>Fair market value based on recent sales is twice as much as the Federal Housing Index Calculator value. Can I really get away with using the FHI value x 10%?</p>
<p>I’m a bit confused about how to handle the debt(mortgages). Do I just take the sum of all outstanding mortgages and multiply by 75%? I used to proceeds of the LOC to make repairs and improvements on the 3 rental units. Would I be able to allocated 100% of the LOC as rental debt and 75% of the first mortgage? Since debt isn’t factored into the primary residence, could I allocate the entire mortgage balance as rental debt?</p>
<p>I’m inquiring about college. I’m done with prep school FA apps. For the past 5 years I’ve been filling out FA forms for prep school(NAIS and TADS). I always had problems when it came to this section. The representatives at NAIS and TADS where very helpful. They would call me and clarify whatever questions they had.</p>
<p>I’m trying not rely on a CSS, FAFSA or school FA rep calling me to clarify things and just get it right the first time.</p>
What do you do on your tax return? If you deduct 75% of the interest, taxes, etc. then I would use the same factor. If all of the LOC was used for the units, then you deduct all of the interest for it on your taxes, and could probably get away with using all of it as rental debt.
I would not do this unless it is what you do on your income tax Schedule E (even then, why would you be doing that?)</p>
<p>Please be aware…the expenses that are allowed by the IRS might NOT be allowed by the schools when computing institutional need based aid. Some of those deductions you are taking could very well be added back in as income for financial aid purposes for institutional aid.</p>
<p>It is my guess the Profile colleges will consider the 3 non-owner occupied rentals as assets and treat them as they would a non-owner occupied unit using the 75%. They tend to add back depreciation and one or two other things that get deducted on Schedule E. My guess is they will consider the other 25% the value of your dwelling and that 25% equity attributable. But who knows, some college consider home equity, some do not and some cap it. You’ll find out come spring…it’s like death and taxes…the financial aid offers arrive.</p>
<p>This is what will happen with Fafsa from the finaid website;
*For multi-family homes and apartment buildings where the owner occupies a unit, the portion not occupied by the owner is treated as an investment asset. Only the units occupied by the family are considered to be the family’s primary residence.</p>
<p>If the property is not deeded separately, the value of the primary residence versus the investment property can be divided using any of the following methods:</p>
<p>(1) Number of units occupied by the owner versus the number of units occupied by the tenants.
(2) Square footage occupied by the owner versus the square footage occupied by the tenants.
(3) Number of bedrooms in each unit.
(4) Prorated according to the fair rental value of each unit. . *</p>