5-Unit Property but County Records say 3-Unit

[Kayla V.]

Hi everyone. I'm looking at a 5-unit property. It's a house that has been split into multiple units but the tax records list it as a three family. 

How does this affect lending? Would this be a residential or commercial loan? 

Are there any legal ramifications to renting out five separate units if it's only permitted as a three unit? 

Thanks!

[Joe Hughis]

@Kayla V. - The property would be legally seen as a 3 unit and fall under a residential 1-4 unit loan.  Only income from 3 of units would be counted towards rental income.  However, something to consider, a conventional lender will likely have issues with a property that was altered without proper permits and a revised certificate of occupancy.  It's not detrimental and I'm sure you can find a lender to fund it.  However, you will be paying 5 unit pricing for a property that an appraiser and lender will see as a 3 unit.