High ratio of non-owner occupancy condo complex

11 Replies | Orlando, Florida

I am trying to use mortgage-conventional loan to purchase a condo investment in a high ratio of non-owner occupancy condo complex in Orlando.  Does anyone know what my chance be to get approved by the bank?

Thanks.

@Aaron K. My income, credit score, and debt to income ratio all are good/excellent. So, do banks not care about the building has high non-owner occupancy and little to no reserve? Do you have one to recommend?

Really appreciate the info.

I have no personal experience with this but for commercial (anything above 4 unit apartment building), banks calculate the value of the property based on the income it generates. You need to run the same numbers to determine current value. I can't remember how it is done off the top of my head but look up Gross Rent Multiplier as a valuation method used by banks. If the numbers don't work out, the bank will not finance. But this is a great opportunity as you can borrow from private lenders, upgrade the property to attract new tenants and 6 to 12 months later, refinance through the bank. The value of the property will have drastically increased (from previous to new property value based on the GRM factor) and you will able to pay off the lenders and walk away with a substantial profit that can be reinvested elsewhere while maintaining the property and rental cashflow...

Originally posted by @Johan Yang :

I am trying to use mortgage-conventional loan to purchase a condo investment in a high ratio of non-owner occupancy condo complex in Orlando.  Does anyone know what my chance be to get approved by the bank?

Thanks.

If the condo has over 50% Non-Owner-occupied tenants, you won't qualify for a Fannie or Freddie loan. This is called a non warrantable condo. You'll need to find a portfolio, non-QM, HML or private lender. These aren't hard to find but your rates and terms won't be as good as Fannie or Freddie.

I hope this helps and have a good one.

Updated about 2 years ago

There's other factors as well but the above is most common. Sometimes you can get around this if the lender doesn't ask for a condo questionnaire.

Hi @Johan Yang - @Michael P. is right... @Shaun Weekes nailed it. Also keep in mind, you have single entity ownership levels to consider as well. Below is a link that will take you to the actual guideline. Conventional guidelines deem condo projects ineligible if one person or entity owns a certain percentage of units in the complex. In general, it looks like this:

Single-Entity Ownership

A project meets the definition of single-entity ownership when a single entity (the same individual, investor group, partnership, or corporation) owns more than the following total number of units in the project:

  • projects with 5 to 20 units - 2 units
  • projects with 21 or more units - 20%

https://www.fanniemae.com/content/guide/selling/b4...

No...townhomes are still PUD's, but are treated more like single family homes in this regard. There is no complex approval process that needs to be done with townhomes (or villas). Just be careful of how realtors categorize these in listings...there are many that confuse the two. To be absolutely certain of the property type, look up the property on the city/county property appraiser's website. It will tell you everything you need to know...