Explain financing & liability in owner-occupied house hacks

[Julie Williams]

Both in person and in webinars, more than one lawyer has said to only buy a multi-family (or apartments over commercial space) under an LLC and one said not to mix personal and commercial real estate. I want to buy property under an LLC, but if I follow this advice not to mix my personal residence and tenants, I can't house hack. Further complicating matters, when I sat down with my bank to discuss conventional 20% down commercial loans, they were interested, but said that I must not live in the property. A second bank voiced the same concern about a commercial loan. The first bank went on to say my other option was to buy it under my own name with a residential mortgage and quietly put the income from renting to tenants on my personal income tax return but "we wouldn't want to know about it. We don't police that." (In that case is was commercial tenants in a barn. The house was a single family.) The second bank said I must not do that. I only plan to buy investments with an LLC. Owners live in multi-families and rent out units to long-term or short-term tenants all of the time. How do owners live in the building in one of the units, get a loan, and have liability issues addressed well? I found a loan product for owner occupied properties but it was in AUSTRALIA, LOL. I first explored this when I looked at a house on almost 3 acres with a 6000 SF barn with tenants in the barn. That town is strict about zoning and would not guarantee the use would be grandfathered and the property ended up having many other serious issues (flood zone, downstream from an antique dam on a river with a history of flooding and bridges and dams being washed out, the rents were below market, there were three code and zoning violations in the use of the barn and a mildew smell in the house. I ran screaming from that property and it's lovely waterfall view.