Loan for Two Houses on One Property

[Matt Huber]

Hey guys,

If a property has two single family homes on one parcel, could it be eligible for conventional small MF financing? i.e. be underwritten like a duplex?

Thanks in advance!

[Dan H.]

Originally posted by @Matt Huber:

@Ryan Garrison @Nick Belsky @Ned Carey

Cool, thanks guys. Yes, it will be a single tax / parcel number for both houses.

I've never used a DSCR loan before. The rents are currently about 60-70% of market. We plan to fix that after the leases expire, but as far as historical income goes, I don't think the DSCR would be high enough.

A question about DSCR loans for small properties - is there a standard algorithm that a lender would use for maintenance and repairs? Or is it based on historical expenses?

 I have financed duplexes that are detached multiple times with Fannie/Freddie loans.  I am surprised to see a lender indicate their belief that this is not a duplex, that a duplex has to be attached.  That is not correct.  

However, when the units are detached, I have been required to obtain separate insurance policies.  Seems strange, but it is what it is. 

As for raising rents to market… if the property is in CA and has been a multiplex for over 15 years the property is covered by CA rent control. The maximum rent increase is 5% + local CPI capped at 10%.  There are a few ways to do a no fault lease termination, but in addition to needing to meet one of these conditions, a no fault lease termination will cost you 1 months rent to the tenant.  my point is raising to near market rent in CA is not as easy as si ply raising the rent.  Also note rent controlled leases do not have a traditional end of lease   The tenant can choose to stay except for the conditions necessary for a no fault leas3 termination 

Good luck