Refi as a SFR or wait unitl it is constructed to a 2 unit Multi

4 Replies

To refi now or wait...

I am at a point where I am about to refi a rental property in Reseda, California that is undergoing construction of a garage conversion to a ADU. Im wondering if it would be better to refi now while it is a SFR or wait until it is complete and rented out as a 2 unit property? Is there benefits to loans for small multis cashflowing $750 per month. Or is there perks to getting the refi done in its current single family state. Thanks in advance!

@Chris Paez I'm not sure if an accessory unit would qualify for a 2-unit property.  Most 2 unit properties have similar square footage to each other and have separate utilities and separate addresses.  If this unit shares the address and the utilities with the main house then it would certainly be considered a 1 unit home.  I have seen separate utility units be classified as a one unit if they are deemed to be an accessory unit.

Having said all of that, you would get more favorable terms with your loan if it was a Single Family Home(SFH). You didn't mention if you were receiving cash out or not but the "Loan to Value" is higher on a SFH and the rate is lower. Hope this helps but if you need more information just tag me and I will respond. Thanks!

Originally posted by @Andrew Postell :

@Chris Paez I'm not sure if an accessory unit would qualify for a 2-unit property.  Most 2 unit properties have similar square footage to each other and have separate utilities and separate addresses.  If this unit shares the address and the utilities with the main house then it would certainly be considered a 1 unit home.  I have seen separate utility units be classified as a one unit if they are deemed to be an accessory unit.

Having said all of that, you would get more favorable terms with your loan if it was a Single Family Home(SFH). You didn't mention if you were receiving cash out or not but the "Loan to Value" is higher on a SFH and the rate is lower. Hope this helps but if you need more information just tag me and I will respond. Thanks!

Thank you for the advice this is exactly what I needed to hear. The ADU is a separate address and seperate utilities. I will move on with my cash out refi as it is. You have helped tremendously!

@Chris Paez it is the same financing 1 or 2 units and adus in most jurisdictions is not considered 2 units. Unless it is portfolio or non traditional financing. 

ADU - Accessory dwelling unit.

I don't do anything in your area just my experience. 

just got off the phone with a local bank and thats it. It's not considered multi... which has a slight benefit for refi. But either way it gets the rates of a non occupied rental. Thank you! @Derrick Aragon

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