Refinancing Multifamily Property Thats Not Properly Zoned

3 Replies

Hello to all. I have a question about refinancing a three story property that has been rehabed into three apartment units. The property has zoning rated RSA-5 which as i understand is usually for single family homes but can be converted to a multifamily dewlling with a variance permit. Does anyone have any experience with refinancing a multifamily property that is technically zoned for single family (withoiut permit)? Do banks give you a hard way to go about this? Thanks in advance.

Banks always give you a hard time ;).

But seriously - The bank as part of their DD will likely uncover this and ask you to fix it. If you don't, they will likely refuse the loan as it presents a 'risk' factor they don't want to deal with.

Your should inquire what it takes (time, cost, etc) to get an after-the-fact variance and possible consequences of not getting it (e.g. violation notice, not getting occupancy permit, ??). Build this into your pro-forma / plans.

IMO - Bad as any situation is, trying to cover it up virtually always makes it worse.

Oren

Originally posted by @Oren K. :

Banks always give you a hard time ;).

But seriously - The bank as part of their DD will likely uncover this and ask you to fix it. If you don't, they will likely refuse the loan as it presents a 'risk' factor they don't want to deal with.

Your should inquire what it takes (time, cost, etc) to get an after-the-fact variance and possible consequences of not getting it (e.g. violation notice, not getting occupancy permit, ??). Build this into your pro-forma / plans.

IMO - Bad as any situation is, trying to cover it up virtually always makes it worse.

Oren