Current Zoning = non lendable?

[Erin Schaefer]

I'm currently under contract for a duplex (my first rental) and have done all the due diligence associated with the property and I'm comfortable moving forward. There are currently tenants in place and this would be a day 1; net positive cashflow of roughly $675/month.

My question relates to the zoning and refinancing. I've received confirmation from the city zoning department that my property is zoning M-1 (light industrial) however the duplex is in legal standing per the City and recognized "as-is". I'm not allowed to expand and in the event of a catastrophic loss, I'm not allowed to rebuild residential - it would need to be light industrial. I've confirmed appropriate insurance coverage and my policy states specifically that I would receive repair cost value even if I'm not able to rebuild residential. 

What I'm having trouble finding out is my ability of refinancing after 6-months. I plan to do some light to medium rehab within the "as-is" allowance in addition to raising the under-market rents at renewal... I'm already getting the property at a solid market discount ($160k vs. rehabbed comps in the $230k range). 

Are there lenders (either QM or non-QM) that would lend on a residential property with M-1 zoning designation without the ability to rebuild?

[Devin Peterson]

Short answer - No. You will not be able to use traditional nonqm or DSCR here. It needs to be able to be rebuilt as is. Commercial / industrial lending is your best bet.