Atypical foundation - will lenders lend on this?

Question

Question for DSCR lenders: I'm looking at a potential STR property that has an atypical foundation. Namely that it has exposed rock in the basement. It's a log cabin, so my hunch is it's not your standard slab foundation, but instead supported in some other way. I'm assuming lenders typically won't touch this sort of thing - is that right? Please share your thoughts!

A few ridiculous photos below - I guess the current owners tried to make the most of the space and turned it into a literal "man cave" :)

Robin Simon · Answer

Will likely be tricky -

Our underwriting guidelines for example (pretty much in line with most DSCR lenders) do not allow "Log Homes" and require:

• Constructed for year-round use
• Permanently affixed continuous heat source
• No health or safety issues both internal or external

Robin Simon · Answer

Generally, lenders are going to want homes that are most liquid to sell or easily convertible to a vanilla cash flowing rental in event of foreclosure, since lenders aren't really in the business or have the expertise to operate more illiquid or niche properties.  Since the market of people that would want to rent long-term or buy a log cabin is much smaller, thus the prohibition or restrictions

Nate Sanow · Answer

That’s a hilarious picture. I don’t know what to make of that!

For me, even if a lender would loan, I am not sure I’d be too trigger happy. In reality 90% of the buyer pool will be ruled out if you need to resell. I personally always want optionality. The option to keep something for 10 or 50 years, or the option to easily exit from the property.

Minna Reid · Answer

I sold a home like this no problems at all. However don't get me started on the log homes ugh.

Michael Dumler · Answer

@Sean Bramble, I just experienced something similar for a property we have under contract. Of course, it was the appraiser that noted a foundational crack along the basement interior wall that needed to be fixed to satisfy underwriting guidelines. Fortunately, the seller did indeed agree to fix it so no issue there. Unfortunately, for your scenario, I have no idea if that's something that can be fixed/corrected. Best of luck!

Sean Bramble · Answer

Thanks @Robin Simon! I've heard similar from a few of my lenders. Question though - why no log homes? Any idea what's riskier about them?

Atypical foundation - will lenders lend on this?

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