Quad loan DENIED due to zoning change

Orlando, Florida
Multi-Family and Apartment Investing
3yFollow

Quad loan DENIED due to zoning change

Account Closed
Rental Property Investor · Windermere, FL · Member since 2019 · 16 posts · 2 votes

We are under contract for a quadplex which we were purchasing with a conventional loan. The quadplex is one building, with 2 units on each side and each side has its own address. This was legally built in the '80s, but since then the zoning has changed to R2. 

The loan was denied because of the zoning change, with the statement saying that If something happened to the building then the structure could not be rebuilt back to a quad.  I was told that we won't be able to get any institutional loan (now, or in the future) so we would have to do cash or seller financing.   Does this sound right? If so, I am assuming this must be a relatively common issue due to zoning changes. This may kill the deal for us, so I am wondering if anyone has any creative solutions on how to proceed?  This is our first multi family deal.

0Reply
18 views

Most Popular Reply

Jonathan Taylor SmithBusiness Member
Rental Property Investor · Durham / Raleigh (Triangle), NC · Member since 2015 · 840 posts · 801 votes
3y

Inquire with different lenders as your current lender is apparently making their loan discussion based upon what should instead be an insurance concern. What difference does it make to the lender if it cannot be rebuilt as a quad if it is insured for at least the loan amount (which they certainly will require)? And when going to alternate lenders, do not give them a ready-made reason to say NO as well by volunteering the zoning concern of the prior lender - let them determine if that is an issue for themselves.

Blue Chariot Realty & Management4.915 Reviews
WebsiteView Page
2Reply
See this reply in the discussion

6 Replies

Jump to latestLatest
  • Billy Daniel
    Rental Property Investor · Russellville, AR · Member since 2014 · 684 posts · 509 votes
    3y

    Ask around with other lenders.  Start with local lenders and look into commercial loans.  Someone will give you this loan.  A lender shouldn't care as long as its insured, in my opinion.

    1Reply
  • Austin Steed
    Real Estate Agent · Columbus, OH · Member since 2016 · 593 posts · 664 votes
    3y

    Find local banks that will do a portfolio loan or go commercial. If it's a good deal the banks should like it as well. 

    This has really helped me grow my portfolio in Columbus OH. Not everything with meet fannie/freddie guidelines so it's always worth having those other banks that will do the loans. 

    0Reply
  • Charles Carillo
    Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
    3y

    @Account Closed

    I am not sure about the zoning issue but, if you are having issues with financing now; when you go to sell the property, your buyer could also have the same problem, and this could affect the marketability of the property. Financing is very important to real estate pricing (think 2005 lending/pricing vs 2009 lending/pricing). If the next buyer has issues obtaining financing, this will most likely negatively affect the selling price. Just one thing to consider before moving forward.

    0Reply
  • Jonathan Taylor SmithBusiness Member
    Rental Property Investor · Durham / Raleigh (Triangle), NC · Member since 2015 · 840 posts · 801 votes
    3y

    Inquire with different lenders as your current lender is apparently making their loan discussion based upon what should instead be an insurance concern. What difference does it make to the lender if it cannot be rebuilt as a quad if it is insured for at least the loan amount (which they certainly will require)? And when going to alternate lenders, do not give them a ready-made reason to say NO as well by volunteering the zoning concern of the prior lender - let them determine if that is an issue for themselves.

    Blue Chariot Realty & Management4.915 Reviews
    WebsiteView Page
    2Reply
  • Account Closed
    OP
    Rental Property Investor · Windermere, FL · Member since 2019 · 16 posts · 2 votes
    3y
    Quote from @Charles Carillo:

    @Account Closed

    I am not sure about the zoning issue but, if you are having issues with financing now; when you go to sell the property, your buyer could also have the same problem, and this could affect the marketability of the property. Financing is very important to real estate pricing (think 2005 lending/pricing vs 2009 lending/pricing). If the next buyer has issues obtaining financing, this will most likely negatively affect the selling price. Just one thing to consider before moving forward.


     Absolutely agree. 

    0Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    3y

    Your property burns down or blows up. The insurance company writes your lender a check for the loan balance and you get the remainder. And the lender is so compassionate they’re worried about what you’ll do with the empty land and a bag of money?  That’s so nice of them. WTH?

    Your insurance company might not let you get “replacement” insurance, but other than that it should be a non-issue. 

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free