How to decommission a unit

6 Replies

Hey there BP community! So I've been searching for information and have not had any luck finding much of anything on this... recently a 5 unit has come up for sale in my target area of Illinois. 1 of the units is unoccupied....I am trying to use FHA financing, and so can only go up to 4 units.

I would like to contact the seller to see if they would be interested in decommissioning a unit, so that I could then get financing and make an offer. I read about this possibility in Brandon's inspirational story and I was hoping I could benefit in a similar way. 

BUT I want to know what exactly is necessary to decommission a unit before making first contact. It can't be as simple as just deciding it is decommissioned and telling everybody? I assume there must be a set list of criteria? Thanks for any and all info!

Bump? Still hoping to find info here. Been asking the few folks that I know, and searching endlessly online, but still cannot find any information on exactly what is required to decommission a unit...

We were looking into this a couple of years ago, the best plan we had come up with before the seller decided not to sell was to use hard money to purchase, then convert two units into one and hope that it passed the mortgage appraisal as a 4 unit...  The seller was living in a 2 bedroom unit and their son was occupying the studio, and we planned to combine the two.  The lender didn't care if the city still had it zoned as commercial as long as the appraisal said it was 4 units.

HEY BP, hoping to bump again. Thanks for that info Kelly! So I talked to my agent and broker about this, and it looks like it's a go for the bank allowing a legally zoned 5 unit as long as it is only being used as a 4 unit to get FHA financing. We just need to have them take off the 5th set of meters for the 5th decommissioned unit.

The sellers agent mentioned the unit is already disconnected from all utilities. How difficult is it to then take off the meters from there? 

Originally posted by @Kasey Ryan :

HEY BP, hoping to bump again. Thanks for that info Kelly! So I talked to my agent and broker about this, and it looks like it's a go for the bank allowing a legally zoned 5 unit as long as it is only being used as a 4 unit to get FHA financing. We just need to have them take off the 5th set of meters for the 5th decommissioned unit.

The sellers agent mentioned the unit is already disconnected from all utilities. How difficult is it to then take off the meters from there? 

Kasey,

What came of this? Just coming across this thread as I may have a similar opportunity.

Thanks,

  will

"1 of the units is unoccupied....I am trying to use FHA financing, and so can only go up to 4 units. "

Ok, you're trying to stay as SFR financing and use your personal credit standing. That only plays three to four times and then the banks will see you as a professional investor.

IMO, Go with the commercial 5+ loan and the property will vouch for itself - - unless this is THE problem facing you, in which case why get into it at all?

Hey Kasey, did you ever resolve this issue? How did it work out?