13 Bedrooms!

4 Replies

Hi Bigger Pockets Community,

I recently started talking with a colleague about doing a partnership deal on a 8000sq. ft. Italiante Victorian house with 13 bedrooms. The house is located a short distance to a small christian undergrad program that does not offer housing. The college continues to grow and the need for housing is great. This house used to be a bead a breakfast and could easily be split into 2 or 3 separate units. 

Questions:

1. If myself or my partner are willing to live in the house, can we get an owner occupied loan? Would the structure of our partnership effect that (i.e. LLC, partnership, tenants in common)?

2. Could we have a non-equity partner that could occupy the property in exchange for free rent, allowing us to achieve the owner occupied loan? 

3. anyone have experience operating a dorm style housing arrangement, like this? '

Thanks!

Luke

I would skip it.  Always think about selling something before you buy it.  Is there going to be a buyer for a repurposed, functionally obsolete structure.  Sounds like an management headache, and do you want to live in a prospective bunkhouse for a distant college, if so for how long.  I would keep Fishing, there are better fishes in the pond. 

If only this world would be so easy. We always find these great things we imagine we can do with properties. 

The first thing to ascertain is whether the building is livable, In other words can someone live in the building as is?

Second forget about the idea of representing you will live in the building when in fact you will not so the idea about your no equity partner or friend living in the building should be crossed out of your mine, that would amount to mortgage fraud.

I would simply ask a lender maybe one that offers an FHA 203K loan if this building might qualify and if they would lend only to you personally or if they would lend to an LLC. Some people have found difficulty in getting an FHA loan for an LLC.

Then you need to make sure with the authority having jurisdiction over that building if you can in fact convert the building to 3 separate living units. Typically this will be your local planning and building departments. If the building can be converted ask what will be all the requirements. 

You would want to cost all that out in the case that you can.

I really see what you have in mind as being allot more difficult than you might be imagining to accomplish.

I do not see this as a project for a beginner , not that you are a beginner but really this is a project for someone well seasoned and experienced.

Thanks @Account Closed for your thoughts and concerns. I am very well aware of the potential costs of converting the building into multifamily and costs of maintenance and repairs on such a large house. I am not sure I communicated well in the first post but the house is currently move in ready. My rental strategy would not require me to split the units or to do any major renovations of the space. The  house is in great condition and has many modern updates. There are currently 3 kitchens and three distinct living spaces but I would not have to completely separate them or convert the building to multi family. The students could split up into the three spaces but would each sign a single lease with a housemate addendum. I currently have this situation with a 5 bedroom house with 2 distinct but not separate living spaces. 

I am confident in my ability to find tenants and manage the building but I agree with your concerns with resale potential. The reason who we would get such a good deal on this property is because it is a unique property and requires a specific strategy. I see it as a trade off, cheaper purchase price but a more limited buyer pool in the future, thus probably cheaper price. 

I do not plan on committing mortgage fraud. I am only interested in trying the owner occupied route if it is legal for one of 2 partners to occupy a house to qualify for owner occupied loan. So, I guess my questions still stand:

1. If myself or my partner are willing to live in the house, can we get an owner occupied loan? Would the structure of our partnership effect that (i.e. LLC, partnership, tenants in common)?

2. Could we have a non-equity partner that could occupy the property in exchange for free rent, allowing us to achieve the owner occupied loan?

3. anyone have experience operating a dorm style housing arrangement, like this? '

Thanks

Luke

Ok, Sometimes we do not really get what is being communicated, Sorry if I misunderstood. I would suggest you get on the phone with some lenders and ask about their policy toward LLC or if you are better off applying for a loan in your own name or names. Lenders are different all around but I have heard of people having problems getting loans under an LLC.