3-unit with commercial on ground floor; what's best loan option?

[Matthew Toporowski]

Hey All,

Looking for some advice. I have a 3-unit off market deal. 2 residential units and ground floor commercial. 3,600 total sq. ft. Residential units rent for $1075 each, ground floor pizza shop for $1100 so total cashflow is about $3,300. Purchase price is around $250k. The one residential is moving out, so I could go with an owner-occupied FHA or conventional loan. Pizza shop on ground floor is moving out too, so I could go for an SBA loan and put my business on the ground floor. I understand there are sq. foot restrictions based on the loan type. For example, SBA would be 51% has to be owner-occ commercial. For FHA 51% has to be residential. For conventional not more than 25% can be commercial. The commercial space is 1/3 of the building or 33%. It's the whole 1st floor. The building is zoned mix-use so I could always just make the 1st floor residential into an apartment. I could also wall off half of it to decrease that commercial footprint.

My question is, since there is flexibility with the building itself, what would be best loan option to go with that would work for this property in terms of best rates, lowest down payment? Or just general advice on making it a 3 unit residential or keeping it a 2 unit residential with commercial on the bottom and get a new tenant.  Seller has offered to demo and build the 1st floor into residential, sale price would increase obviously.  The building is right next to a high school in a small, upstate city. Thanks much!