Buying my first Fourplex - Advice Advice Advice please!!

[Fas McO'nen]

Hi BP,

I just got my first fourplex under contract. I just found out that the property is zoned as R-6 (commercial) but by grandfathering rule, it is currently used as a multi-family residential. My lender said that they don't do commercial loans. She stated that they would have to appraise the property and if the appraiser states the "best use" of the property is commercial then they can't do the loan.

The area has a lot of multi-families that are all zoned as R-6.

What advice do you have? I don't think requesting to get it zoned to R-4 (residential multi-family) is an option but my question is, what are the requirements to getting approved for a commerical loan? I understand the interest rate will be higher but even at 6.5% interest the cashflow and ROI is pretty good. I want this property really bad, but not sure of the best route to take. Any advice is greatly appreciated!

Thanks in advance

[Cody L.]

Originally posted by @Fas McO'nen:

Hi BP,

I just got my first fourplex under contract. I just found out that the property is zoned as R-6 (commercial) but by grandfathering rule, it is currently used as a multi-family residential. My lender said that they don't do commercial loans. She stated that they would have to appraise the property and if the appraiser states the "best use" of the property is commercial then they can't do the loan.

The area has a lot of multi-families that are all zoned as R-6.

What advice do you have? I don't think requesting to get it zoned to R-4 (residential multi-family) is an option but my question is, what are the requirements to getting approved for a commerical loan? I understand the interest rate will be higher but even at 6.5% interest the cashflow and ROI is pretty good. I want this property really bad, but not sure of the best route to take. Any advice is greatly appreciated!

Thanks in advance

Huh?  What's an "R-6"?  Houston doesn't have zoning.   If it's a 1-4 family, it's residential and would fall into the generic vanilla confirming loans that all banks do.  If it's a 5+ unit, it's a commercial property.  If it's commercial, just go with a commercial loan.  You don't get it "re zoned" since the loan is based on what the property is, not any zoning (that doesn't exist in Houston anyway).

People seem to think commercial loans are scary and hard to get.  IMO they're 10000x easier to get than residential loans where you have to fit in a dumb box.