Property Appears Residential But Is Zoned Commercial

3 Replies

Hello Forum,

I am currently working on a deal for a Colorado property that by most common sense would appear to be residential. It has 26 units (Apartments & Trailers) on the 1.68 acre lot. However, the MLS indicates that it is zoned "Commercial."

I would prefer to get a residential mortgage loan on the property because of favorable interest rates. Plus the bank I work at only funds conventional mortgages. If I borrow from my bank, I can achieve better rates and reduced closing costs. WIN!

How should I proceed? Should I work to get the property rezoned? Must I look into a commercial property loan with another lender? What more can I do to enhance the financing on this deal?

Thank you!

Originally posted by @Hunter Hughes :

Hello Forum,

I am currently working on a deal for a Colorado property that by most common sense would appear to be residential. It has 26 units (Apartments & Trailers) on the 1.68 acre lot. However, the MLS indicates that it is zoned "Commercial."

I would prefer to get a residential mortgage loan on the property because of favorable interest rates. Plus the bank I work at only funds conventional mortgages. If I borrow from my bank, I can achieve better rates and reduced closing costs. WIN!

How should I proceed? Should I work to get the property rezoned? Must I look into a commercial property loan with another lender? What more can I do to enhance the financing on this deal?

Thank you!

 A property containing more than 4 residential units is considered commercial for lending purposes. The property having 26 units means you would have to use commercial financing. 

If you want to invest in multifamily properties so that you can use conventional mortgage loans, focus on the 2 - 4 unit properties.

Yeah you're talking about two different things. Zoning, and financing.

Zoning is what the town/city/county/municipality will ALLOW to occupy that space.

Financing is as stated above by @Anthony Gayden and you will need to get a commercial loan.

In either case - the MLS is NOT the authority on the subject. For zoning, check with the local municipality (can often be found online under assessor's records).

I really appreciate the direct responses. That helps! 

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