Conventional Owner/Occupy with Rental Potential

[Steven Holiday]

Hello Friends.

Thanks for all your posts and new information. I learn a lot. Let me ask for some input on a situation I’m considering.

My wife and I are qualified for a five percent down loan, owner occupy. Conventional. Not FHA.

There’s a mid-century house that is listed at four bed / three bath.

When we visited the home with the seller’s realtor, we learned that the house is actually barely a 3/1.75, but it has a decent apartment above the unfinished, two-car garage.

This is why it’s listed 4/3.

The apartment was occupied by a nonpaying tenant until he left with rent unpaid. The apartment is in shoddy shape; not terrible, but certainly not rent ready. I won’t know the full situation until someone does a more thorough walkthrough.

In addition to the garage apartment, there’s a two-car garage by the alley that is just studs and roof, but the deceased parent of the seller always wanted to turn that structure into an apartment as well. Currently, it would be perfect for storage, but not hooked for electric, water, etc.

The idea I am considering is this.

1. I get a property manager to agree to manage the finished, above garage unit, the unit by the alley, and the main house (after my family has lived in the main house as long as necessary).
2. I get tight bids on rehabbing all three units and refi as soon as all three are rent-ready. The main house would need some work before we’d move in.
3. Upon refinance, my costs are covered, choose to rent out or move into the main house.

My question at the moment is…

1. Could I refi after only three or four months of rehab?
2. Would I still be need to plan to occupy the property even if I refi?
3. Technically, this property is still a single family with an extra bed and bath above the garage. Is this listing not exactly in line with the intention of the loan? Obviously, I don’t want to get involved in anything shady and even if I did, wouldn’t a shady situation be picked up by the appraisal?

I sure apologize if this is too confusing. It makes a lot more sense in my brain than I’m able to type out.

Thanks in advance for any guidance.