FHA Mixed Use Question

[Joe H.]

So I found out you can now use FHA to acquire mixed use properties with up to 49% commercial component. The multifamily market in my area is totally overwrought (if you can even find something on the market at all) so I'm thinking of advising a client to pursue a mixed use building.

My one question would be how the FHA counts commercial storefronts from a unit count perspective. Is each separate storefront a "unit"? The line is very clear with pure multifamily, but sometimes you might have a building that has 3 big residential units that are 1000 SF each and then 600 SF of storefront divided into two tiny little storefronts. Do each of those count as a "unit" thereby making it a 5 unit building and ineligible for the loan? Seems very odd to me that FHA ever started allowing mixed use, but I sure want to find out how to best take advantage of the program given the newish rules allowing it.

[Steven McAdoo]

Hi Joe, this is a great question that I'd be interested in getting answered also. I haven't seen anything that addresses this issue specifically. I'm here in Chicago also and am about to begin a search for a mixed use property that would be a good candidate for this loan for the same reason that you mentioned (tight competition for small mfh). I imagine the pool of buyers for this type of property is much smaller. If you come across anything good in your search that doesn't work for your client, please feel free to contact me and maybe we can put something together.