4 Units or 5 Units: That is the Question

2 Replies

Hey All,

I am working on a deal right now with an absentee owner of a 4 unit building... well maybe it is a 5 unit building. I am not certain. There are two units on second floor but on first floor I am still trying to decide.

Take a look for yourself:

Clearly, there are two 1 bedroom units on this floor. On the front side of the building though there is an "office" that has two 1/2 baths but no kitchen or closet in the "bed". There is a passage door along the closest exterior wall leading into the common area hallways. 

The rental license shows it to be "4 dwelling units + office (low-rise)" but the county is showing it simply as a 4 unit residential. 

Seller is currently renting the space out to a chiropractor on a month-to-month lease. I really do not care either way because if I can pull this deal together I will be converting the space to an additional unit which zoning will in fact allow for. 

With that said, I am hoping to finance this via FHA. What I am unclear of is what will the FHA appraiser/inspection would consider this unit? A commercial unit? Maybe as additional rentable space much like parking or storage?

Someone has had to have run into this before. Thanks in advance for your input!


Unfortunately it sounds like a mixed-use property so it probably won't go FHA. Another thing to consider, if they do determine it is 5 units, it won't go FHA either. They will only do 4 units max. I said 'probably'. Check it out with a local appraiser. Sometimes they can be swayed by how it is recorded in public records. It will be hard for you to approach an appraiser directly unless you know one. Your loan officer (L.O.) might have better luck. With today's restrictions on contact between L.O. & appraiser it might be tough but it should be possible for the L.O. to give you an answer without you having to pay for an appraisal to find out. Good luck.

Hi Brett! Thanks for your response and input. Once I discovered this was classified as a mixed use (and after I posted this here) I went to the city zoning office to see what I could do if anything to get it rezoned. There is still a glimpse of hope!

This site I in a pocketed area of MF5+, mixed use, and SFR. The zoning official stated that it is not unlikely to get this reclassified and residential/mf because of its surrounding property types. Essentially, it doesn't fit in the neighborhood given its current use.

The seller has agreed to move forward with the attempted re-zoning and will do whatever I need him to do on his end. I will do most of the leg work though.

It will be a fun challenge to be involved in!

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