Is this considered a commercial property (5-unit)

1 Reply

Hey all,

Got a peculiar dwelling I'm looking at. Two properties on one lot. Both multi-family homes, one being a 3-unit, the other a 2-unit. They are both being sold together. 

Would this be considered a commercial property since, combined, they are 5 units? Or does it depend on the individual building?

Thanks

There can be issues with properties like that with two buildings sitting on one parcel. It depends how everything is set up.

With some lenders they will group properties together as one portfolio loan. They generally like them together and sometimes will allow in a certain mile radius.

Some issues will be if you want to sell one property down the line how much payment will be needed to release it off of security for the total loan.

A local bank or credit union is likely going to be the lender on this property. Does the seller have a loan now?? Is it with a local bank?? Could you assume the loan and have the seller hold a second for most of the equity difference reducing your cash down??

If a local bank has the loan they already might be inclined to do a new loan on it since they have  a history with the property versus a new lender where it's just a loan to them. Your bank even if they do not have the loan yet might finance it if you have a bunch of deposits with them already.

You would need to put together a little package on the property and bring around to local to regional banks and credit unions to see their appetite for it. The application takers will tell you anything so look to the underwriters for the real answers on whether it can get funded or not. Smaller banks are sometimes better as you can talk directly to someone on the loan committee a VP etc. versus they have to send off application to the corporate office and you have no real feedback.

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