Rental Property Investor · Portland, OR · Member since 2015 · 338 posts · 332 votes
This question may be specific to places like Portland where the city encourages density by allowing accessory dwelling units (ADUs) to be added to properties in residential zones.
If I purchase a 4-plex (zoned residential R2 in Portland) and rehab it to include an ADU, can I still finance with a residential mortgage? Because the permitting process is different to add an ADU vs a bonafide extra unit, and because SFRs with ADUs in Portland are still classified as SFRs, my hunch is that an ADU could be added to a 4-plex yet the property would still qualify as residential for lending purposes.
Anyone have any concrete knowledge about that? @Charlie Fitzgerald, do you know?
Dani Z. That would be great if it did work that way. Unfortunately the city has a different interpretation and allow ADUs strictly for SFRs. By adding an additional unit on a 4-plex you simply create a 5-plex in their eyes.
Thanks @Neal Collins--I've owned a duplex in Portland since 2012 and have studied the zoning code and have never seen that regulation. Did someone tell you that? I've also heard from contractors and designers that sometimes you will get two different answers from two different people in the planning bureau, and if you don't like the answer you get from one person, just go back another time when someone else is at the desk.
In any case, here's what I found in the zoning code:
and
So if, for example, there is a 4-plex on a lot zoned big enough for 5 full units, and I add an ADU, I would still be able to add a regular unit on top of that, if I wanted. If I don't, and just keep it as a 4-plex + ADU, then the city would still consider it a 4-plex, because according to code, it could become a 5-plex in the future.
Unfortunately @Account Closed Neal is correct. ADUs can only be added to single family property. I have the code here somewhere, but not the time to dig it up. A new unit to a 2+ unit site will be classified as a new unit. The new unit will have to adhere to the commercial building code and will have to be sprinklered. A lot line will have to be "implied" when figuring distance between existing structure, firewalls and window % of the facade. It's a much more difficult process than simply building an ADU.
I've been wondering about this as well. What if the ADU is already there? Would I have to get a commercial loan for a 5 unit property? This property is in Hagerstown, MD.
"4 Unit Rental with 5th unit detached in separate bungalow."
@Account Closed Once you break over 4 units you are considered commercial in the traditional banking world. You might be able to get portfolio lender to give you a residential like terms.
ADUs are only for SFR (just as the other said) - no 2,3,4 units you are adding unit - once you go above 4 you are commercial if you looking to sell. Really clear in the code and if there is someone telling you other wise i would really question there experience.
3rd unit sprinkler and all that is only if you add to existing structure (i think) if detached if you meet required setbacks i think you will be fine. They did just change the structural code to incorporate 3rd units sprinkler and structural upgrades. There is also a 1 hour fire wall if you are 10' from property line even though the setback usually are 5' from a planning standpoint.
If you can split the lot on the duplex separation point and create now 2 new lots with SFR on each you could then ad adu to both new lots.
@Derrick Aragon sprinklers will be required on the new unit only (most of the time). No sprinklers will be required for the existing building, unless your windows won't work for fire seperation standards, at which point a "sprinkled area" on the original structure may be required. We have this in play now on one of our multi family properties. The new structure will be close enough to an attached deck, that we will have to sprinkle the attached deck (has contiguous roofing), but not the rest of the existing structure.
@Account Closed the thing to remember about commercial versus residential is that banks and the building code are different. Banks are 5+ units = commercial. The building code is 3+ units = commercial. Small difference in perspective, but major differences in the physical building and planning of projects.