Boston, MA Lending - Tenants Remain in Place Jan 2023

[Chris R. Gallo]

Good afternoon BP! 

I am currently in search of my third property and currently found a property that has tenants in place until the end of January 2023. 

Its a Multifamily (2 fam) that I intend to move into once of those tenants leaves. The other tenant I intend to adjust the rents towards a stronger market rate but what sort of strategies do I have towards a loan? Is this a convential path? Investment? 

Interested to hear from the specialists!

Thanks in Advance!

[Ashley Lamoreaux]

Hi Chris,

Unfortunately, this would have to be done investment at first, and then if it makes sense to refinance, you can refinance as a primary residence once one of the units is vacant and you have occupied the unit. Occupancy fraud is on the rise with the current home prices and rates rising, because people want the lower rate for primary residence and lower down payment with the inflated home values. So, lending guidelines have become more strict to avoid occupancy fraud, especially with multi-family properties. One of the main items that we have to show, is that at least one unit is vacant prior to Closing. 

One thing you could do, is ensure the Closing is within 60 days of the lease ending, and do a Use & Occupancy Agreement in the Purchase and Sale Agreement. However, for primary residences, you have to occupy the property within 60 days of Closing, so if lease ends 1/31/23, you could Close 11/30/22 with a 60-day U&O agreement. Bit of a sticky situation, I would get with your realtor, lender, and attorney to discuss a U&O option if you were to go that route.

Hope this helps!

Regards,

Ashley