How to finance a duplex + ADU

Question

I've come across a few other posts on this topic, with a few people saying they found solutions but not many specifics offered.

I currently have a duplex with ADU (3 units total) for sale in Durham, North Carolina with a solid amount of interest. The problem is that Fannie Mae / Freddie Mac will not back multi family properties with an ADU. It's a bizarre distinction to me, but that's the reality I'm working with.

Can anyone point me to a loan product that my interested buyers can use? We've explored commercial loans, but the terms don't really work for most multifamily buyers.

Someone in this thread said they did it successfully, but didn't leave enough info for me to track down: https://www.biggerpockets.com/...

I figure this wonderful site must have an answer to this question!

Caroline Gerardo · Answer

Freddie and Fannie don't currently like investors and they don't like all the million variables that ADU adds into appraisal. Right now they won't but in California (SB-13) and nine other states laws passed which open the highway for ADU. The Federal budget has all kinds of doors for low and moderate income loan programs coming, just not there yet.

How much clearance from street and neighbor? Design style? Are there 3 unit comps in past 3 months in neighborhood? If it can appraise without too many exceptions- as in: there are 3 unit sales in 9 miles in 3 months with similar square footage... I can recommend a couple lenders. Not GSE pricing, but not hard money, in between because there is risk in the middle where your property type is today.

Greg Fitch · Answer

Chris, greetings from nearby Chapel Hill. So 4 units or less is considered residential, not commercial. Have you tried Truist, First Citizens,etc. The ADU shouldn't be an issue with them.