Should I buy a house that is zoned commercially?

Question

Hey guys!

I have the opportunity to buy a house for what seems like a sweet deal off-market and through family. It's a 5 bedroom triplex in Great Falls MT with repairs needed to the foundation.

My idea is to buy and hold(there's good cashflow) with the option of selling at an appreciated price. But the problem is that it is zoned commercially. From the little bit of research I've done it sounds like this could make selling a real nightmare. The house literally has businesses on it's left and houses on it's right.

So my question is what are some of the common problems you run into owning a house that is zoned commercially?

And, What are the proper questions I need to ask to find out what I need to know to make a sound choice?

I appreciate the help!

Levi Tansy · Answer

@Bjorn Ahlblad

Hey I appreciate the help! I'll definitely peek around the BP forums on this. And I know the cash flow because of the experience my relative has had over the past 10 years with the property. The monthly income from rent will be about 2% of the purchase price and it's had an extremely low vacancy rate.

For how I'm financing, my relative would seller finance the deal. So I definitely have some wriggle room to make a move.

I really appreciate the input! Please let me know if you have any other thoughts on it

Levi Tansy · Answer

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Bjorn Ahlblad · Answer

@Levi Tansy You need to find out a lot more-as you said.......do some searches here on the site. Sometimes zoning can prevent use as a dwelling, other times no problem. Often a loan will be considerably more money or difficult to obtain. The fact that it is off market does not make it a good deal or a bad deal; it does mean you could be potentially exposed, and if you are also inexperienced that could spell trouble. It could be a great deal, or selling could be a disaster, and buying could be that too.

How do you know how well it cash flows? Did you put it through a calculator, did someone tell you that it cash flows; or did you run the numbers yourself?

At the very least deal through an experienced RE attorney, and have it appraised professionally; the appraisal will tell you value and how it can be used. Alternatively you could hire a 'Buyer's Agent' an experienced RE agent to act on your behalf, answer your concerns, and run some comps on the property, help you negotiate, write an offer etc. A Buyer's Agent will often work for 2-3% of the selling price. Just because you are dealing with family does not mean you can't get screwed! All the best!