Need some help with how to finance this deal with minimum out of pocket as possible! Currently set up as vacant commercial property, needs full gut rehab, convert into 3 unit, owner occupied property. Numbers fully check out. 

I finally found my dream property after looking for years, and finally ready for the investment.  An old truck garage with an office. I want to live in the back garage, and convert the two story office in the front into Two 1BR units. It's zoned for multi-family, so no issues there. 

From my understanding, a 203k loan won't work because the existing use is commercial, even though renovations and purchase will be under the loan limit. 

I have a hard money guy that would do 75% acquisition + 100% rehab, but how would I refinance them out as an owner occupant? I would definitely want to pull as much of the 25% out as possible. 

So what are my options? I'd obviously like to avoid the hard money route if possible. I would like to take advantage of owner occupant and first time home buyer. Good credit and good income. 

Any other suggestions?

Purchase $250,000

Rennovation $300,000

ARV $900,000

Have you contacted your local Commercial Mortgage brokers?   If not that would be my first step, also be sure to get a phase 1 environmental done to ensure the ground is not contaminated. (Will need to be done as part of the mortgage process I believe) 

Originally posted by @Gabe Sirkin :

Need some help with how to finance this deal with minimum out of pocket as possible! Currently set up as vacant commercial property, needs full gut rehab, convert into 3 unit, owner occupied property. Numbers fully check out. 

I finally found my dream property after looking for years, and finally ready for the investment.  An old truck garage with an office. I want to live in the back garage, and convert the two story office in the front into Two 1BR units. It's zoned for multi-family, so no issues there. 

From my understanding, a 203k loan won't work because the existing use is commercial, even though renovations and purchase will be under the loan limit. 

I have a hard money guy that would do 75% acquisition + 100% rehab, but how would I refinance them out as an owner occupant? I would definitely want to pull as much of the 25% out as possible. 

So what are my options? I'd obviously like to avoid the hard money route if possible. I would like to take advantage of owner occupant and first time home buyer. Good credit and good income. 

Any other suggestions?

Purchase $250,000

Rennovation $300,000

ARV $900,000

Zoning is going to be the first question any lender should ask for a property like this. What's it zoned and is a residential multi family considered legal use.

Once you've gotten past that hurdle, understand you will not qualifying for any 1st time homebuyer products at that loan size.

Once you've gone through both of those your options narrow and you should be thinking of either a homestyle renovation loan or a FHA 203K. Even better, look into Fannie's 90% construction loan. That would be the best choice of all.

If none of those work (and the zoning is residential), go hard money and then refinance it into conventional.

Loans are like Plinko on The Price is Right.  You just have to follow the ball as it hits the pegs to see the type of loan you end up with.

Best of luck

Stephanie

Hi Gabe 

You actually can do a 203K on this deal.  It will be tricky for a few reasons but it is possible.  First thing is you need to make sure that the end project will have the residential space occupy at least 51% and the commercial space at 49% or less.  If the current setup does not meet this requirement it would still be ok as long as the finished product is 51/49. Second hurdle and the more difficult one will be finding comps.  I have done a lot of 203Ks of mixed use properties whether they were garage conversions like this or church conversions, the challenge is making sure you have comps.  If you can meet these 2 items than over you should be fine with a 203K. 

Everyone is saying I can't because it's not currently set up a residential. Obviously the end result will be 100% residential, with 3 units. The way I would see this is it's just a 3 unit property, so comps would be 3 units. 

Originally posted by @Bill Rich :

Hi Gabe 

You actually can do a 203K on this deal.  It will be tricky for a few reasons but it is possible.  First thing is you need to make sure that the end project will have the residential space occupy at least 51% and the commercial space at 49% or less.  If the current setup does not meet this requirement it would still be ok as long as the finished product is 51/49. Second hurdle and the more difficult one will be finding comps.  I have done a lot of 203Ks of mixed use properties whether they were garage conversions like this or church conversions, the challenge is making sure you have comps.  If you can meet these 2 items than over you should be fine with a 203K. 

Theres a difference in my market between zoning and occupancy. The zoning is the most flexible in the city, and allows for just about anything (in this case it's zoned for multi family or 3 units). The occupancy is most likely for an autobody shop. That would need to be changed to a residential but I want to do that with the 203K money.

Originally posted by @Stephanie P. :

Originally posted by @Gabe Sirkin:

Need some help with how to finance this deal with minimum out of pocket as possible! Currently set up as vacant commercial property, needs full gut rehab, convert into 3 unit, owner occupied property. Numbers fully check out. 

I finally found my dream property after looking for years, and finally ready for the investment.  An old truck garage with an office. I want to live in the back garage, and convert the two story office in the front into Two 1BR units. It's zoned for multi-family, so no issues there. 

From my understanding, a 203k loan won't work because the existing use is commercial, even though renovations and purchase will be under the loan limit. 

I have a hard money guy that would do 75% acquisition + 100% rehab, but how would I refinance them out as an owner occupant? I would definitely want to pull as much of the 25% out as possible. 

So what are my options? I'd obviously like to avoid the hard money route if possible. I would like to take advantage of owner occupant and first time home buyer. Good credit and good income. 

Any other suggestions?

Purchase $250,000

Rennovation $300,000

ARV $900,000

Zoning is going to be the first question any lender should ask for a property like this. What's it zoned and is a residential multi family considered legal use.

Once you've gotten past that hurdle, understand you will not qualifying for any 1st time homebuyer products at that loan size.

Once you've gone through both of those your options narrow and you should be thinking of either a homestyle renovation loan or a FHA 203K. Even better, look into Fannie's 90% construction loan. That would be the best choice of all.

If none of those work (and the zoning is residential), go hard money and then refinance it into conventional.

Loans are like Plinko on The Price is Right.  You just have to follow the ball as it hits the pegs to see the type of loan you end up with.

Best of luck

Stephanie

 

Originally posted by @Gabe Sirkin :

Everyone is saying I can't because it's not currently set up a residential. Obviously the end result will be 100% residential, with 3 units. The way I would see this is it's just a 3 unit property, so comps would be 3 units. 

Originally posted by @Bill Rich:

Hi Gabe 

You actually can do a 203K on this deal.  It will be tricky for a few reasons but it is possible.  First thing is you need to make sure that the end project will have the residential space occupy at least 51% and the commercial space at 49% or less.  If the current setup does not meet this requirement it would still be ok as long as the finished product is 51/49. Second hurdle and the more difficult one will be finding comps.  I have done a lot of 203Ks of mixed use properties whether they were garage conversions like this or church conversions, the challenge is making sure you have comps.  If you can meet these 2 items than over you should be fine with a 203K. 

It 100% does not matter how it is setup now. It matters in the end.  I do a 100+ 203ks a year and have seen scenarios like this. 

 

Gabe I think you and I spoke a few years back as well through the Rehab Loan Network. 

@Gabe Sirkin

If the zoning allows for multi unit residential, then blaze forward.  203K would work or for better pricing and less mortgage insurance (by far) go with Fannie's 90% construction/renovation product.

Stephanie