Portland, OR - Found My Deal - Please advise...

8 Replies

Hello all,

I have the opportunity to purchase a 3 structure property in the heart of Portland. There are 4 total units (single family, duplex, & mobile home). The property is zoned R2. My residential lender has expressed to me that there can only be 1 structure on a residential lot and therefore it will require commercial financing. Is this correct? 

Either way it appears I will need a new lender.

You need to check with the city. Obviously with straight zoning if your lot is 6k your ok for 3 structures at R2. But there are way more variables and you need to run them by the permitting bureaucrats at the 4th avenue building. I’m sure you already looked thoroughly at portlandmaps.com?

@Steve B. - The lot is ~ 19,500 sqft. I have looked thoroughly at the property on Portland maps and also know the property in depth personally. What types of variables might I be looking at in the given scenario?

@Ellen Dalinger - Thank you! That is exactly where I went when my lender told me it would only qualify for commercial lending.

R2 will become RM1 sometime this year, and everything will change.  PM me for those details, if you're interested.  Ultimately the zoning matters if you plan to develop the lot, or sell to someone as a developable lot.  

In any case, residential is 4 units or less on a lot. Maybe mobile homes need a different kind of loan; I'm not familiar with those. But I don't think your lender is correct about that. If he were, anyone getting a mortgage for a house with an ADU would need a commercial loan, and that's simply not the case.

Originally posted by Account Closed:

R2 will become RM1 sometime this year, and everything will change.  PM me for those details, if you're interested.  Ultimately the zoning matters if you plan to develop the lot, or sell to someone as a developable lot.  

In any case, residential is 4 units or less on a lot. Maybe mobile homes need a different kind of loan; I'm not familiar with those. But I don't think your lender is correct about that. If he were, anyone getting a mortgage for a house with an ADU would need a commercial loan, and that's simply not the case.

 or a 4 plex  maybe what they are thinking is its a non conforming grandfathered use.. 

I don't know what your brokers underwriting guidelines were that did not allow the financing, but I would assume it was around the mobile home.  I assume they were misinformed about the only 1 structure per lot.  They may be able to explain them to you.  

I did a quick look at some underwriting guidelines and here is where I see the issues.

Long drawn out painful too much information version -

The R2 zoning would not be a showstopper, but it is worth taking note and reading the appraisal carefully. As long as it's common for the area, not listed as illegal use, etc.. it would not be a big deal. However, it's critical to be aware that the appraisal will either make it a non-event or be the pre-show to a 3 ring circus event that includes rebuild letters from the City, variance/grandfathering, etc...

Mobile homes are considered personal property and as such are not eligible for a residential mortgage.

When a mobile home becomes a manufactured home, and that manufactured home has it's title from the DMV fully surrendered and fully converted into real property then at that point if:

  • It is the ONLY unit on its own lot; and
  • its permanently attached to a permanent foundation; and
  • It meets all the normal manufactured home eligibility requirements 

Then - at that point, a manufactured home could be financed via one of the following correspondent options.

  • Conventional Manufactured 80% LTV/HCLTV/CLTV
  • FHA
  • VA
  • USDA Manufactured.

When a manufactured home has an accessory unit (mother in law, granny unit, guest house, etc...) the accessory unit will disqualify the manufactured home for financing.

When a manufactured home is the accessory unit it will disqualify the property (technically Fannie / Freddie will allow, but investors do not).

Very important -

Accessory units are ONLY allowed/accepted, when the property is officially a "single family" property. When a property is multi-family (2 or more units) accessory units are not allowed.