home sharing income from their primary residence as part of their mortgage refinancing application. The three mortgage lenders in the initiative are Quicken Loans, Citizens Bank, and Better Mortgage.” No doubt short-term rental income will be increasingly accepted for mortgage applications, along with a proper accounting of the costs required to operate such facilities. THE QUESTION OF SHARED EQUITY No doubt other loan programs for short-term rentals will become available if only because the mar- ket for shared-income properties is large and growing. But, while the market is attractive, it will require careful underwriting to ensure that residential financing is not being provided for investment properties or for borrowers who cannot afford to
finance without rental income. Or, maybe we need to look at this differently. Affordability is a big issue for many borrowers, especially first-timers. Research by ATTOM Data Solutions found in March that median-priced homes are not affordable for average wage earners in 71 percent of US housing markets. Many would-be buyers are being frozen out of the marketplace. But, if you can’t buy a home out- right, perhaps it makes sense to buy part of a home. Looking forward, we are likely to see an increase in shared equity arrangements: • A property will have both a res- ident owner and a non-resident investor. • Each owner will be able to potentially deduct their portion of the mortgage interest and
property taxes. In addition, the investor will be able to deduct a portion of the depreciation and repairs. In practice, the resident owner will be unlikely to item- ize real estate write-offs while the investor will have business deductions.
• The property will offer short- term rentals.
• The resident owner will essen- tially act as an on-site manager.
• The income from the short-term rentals will offset ownership costs for both the resident and investor owners. • If property values rise, the resi- dent owner will gain equity that’s unavailable to renters. If property values fall, some of the loss will be absorbed by the investor.
HISTORICAL HOME AFFORDABILITY
MEDIAN HOMES PRICES
PCT OF AVERAGE WAGES NEEDED TO BUY MEDIAN-PRICED HOME
35% 35% 34%
$250,000
35%
33%
32% 32%
31% 32%
29% 30% 30%
29%
30% 29%
29% 29%
28% 27%
27%
26%
$187,500
26%
26%
$125,000
18%
$62,500
9%
$-
0%
thinkrealty . com / hnr | 21
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