Hey all,

I’m currently looking at a mixed-use commercial property that includes some SRO (Single Room Occupancy) units, and I’m running into challenges with financing. From what I understand, banks tend to avoid financing properties with SRO units due to the perceived higher risk (inconsistent cash flow, transient tenants, zoning issues, etc.). Has anyone dealt with this before? Any insights on how to navigate this?

Additionally, I’ve secured seller financing for half of the purchase price, but I’ve been told this could complicate things further since banks typically prefer being in the first lien position. Is it true that this would make it harder for me to get a loan from a bank for the remaining balance?

Lastly, what’s a reasonable interest rate to offer the seller on their financing? I want to ensure it’s competitive but also makes sense for both sides. Any advice on what typical seller financing rates look like in the current market?

I’d appreciate any tips or personal experiences. Should I consider alternative financing (e.g., hard money lenders or bridge loans) or focus on getting a subordination agreement with the seller? Also, would making improvements to the property (e.g., converting SRO units to apartments) help with future refinancing?

Thanks in advance for your insights!