Part rehab, part occupied... Will it qualify for a mortgage?

Question

Hey BP,

I’ve located a triplex that has some potential but am wondering about financing. It is 33% occupied and the one unit puts it over the 1% rent to price ratio. However, the other two units and the exterior need swork to make rent ready .

In general terms, would this property still qualify for an agency loan because it is occupied?

Thanks for the input!

Phillip Richardson · Answer

@Aaron Hale 10% vacancy was the most allowed on a refi.

Aaron Hale · Answer

Thanks, I am pretty sure I’ve got it down, but just to be clear... If, in this case, there are three units, that means three working ovens, three working refrigerators,, etc? The whole thing is a no-go if one unit is still missing a toilet.

Chris Mason · Answer

In general for a traditional loan, it needs to be a complete and functional home absent safety hazards.

Example of a no-go: Missing an oven. Can't cook food = not a kitchen = not a house, in Fannie Mae's eyes.

Example of a go: 1970s gross yellow wallpaper stained with cigarette smoke, fridge from the 1980s in that yellow color. But everything in that kitchen functions.

Chris Mason · Answer

More or less. Traditional mortgages aren't for construction sites. If one unit is missing one out of two toilets, you can probably work something out. Maybe the bathroom missing a toilet isn't a bathroom, maybe it's a storage room.

Aaron Hale · Answer

...even if the other units are occupied. I forgot to add.

Nicholas Covington · Answer

@Aaron Hale from what I am reading the answer would be no. Appraisal can not be "subject to" but you definition of rent ready could just mean cosmetics, which is normally fine. If its not currenlty livable then that is where the problem will show.

Part rehab, part occupied... Will it qualify for a mortgage?

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