Ability 2 create- 4plex (residential loan) or a 5plex (comercial)

[Vanessa Watts]

Hi everyone! Looking for some advice. I am currently remodeling a property that could easily be set up with 5 studios. I have been recommended to set it up with 4 units so it stays as a residential property and qualifies for residential loans ( I guess easier to get vs. comercial?).If I set it up as a 5 unit it will become comercial real estate and then a comercial loan would apply. As a 5 units I would have more upfront cost but would also have more cash flow. 

Would turning it into a five plex limit the amount of potential buyers in the future making it harder for me to sale the property? Maybe negatively affecting the property value because of the type of loan it now would qualify for?

Any advice will be greatly appreciated! Thank you very much!

[Charles Carillo]

@Vanessa Watts

Yes you would need a commercial loan for a 5 unit property. I wouldn't limit the number of units and limit the cash flow just so it qualifies for residential financing. Your goal should be to boost the NOI which will increase the property's value.