Residential loan for a commercially zoned property but it is a home

[Jay Chung]

Hi folks,

I'm looking at a listing that I'm not able to disclose but I'm wondering if I can get a residential conventional 30yr fixed loan for this commercial property. The place is a 2 bed/2bath but it's zoned as commercial. The previous owner rezoned it or the city did but the guy in there is selling through a commercial broker. Is it possible to get a 30 yr fixed loan for this type? What information do i need to check?

[Jacob St. Martin]

Quote from @Jay Chung:

Quote from @Jacob St. Martin:

If it is a single unit 2 bed/2 bath you can definitely get a residential loan. Here is most likely what is going on:

The city changed the zoning districts and they upzoned this area from residential to commercial/multifamily because they need higher density housing. The previous owner then saw an  opportunity to sell it for more than it was worth before because a developer can turn it into a much larger asset and make a lot of money. 

In this scenario the property as a residential property is normally a terrible deal because they are basically selling it as commercial land so you might want to look into that. If you are a developer and plan to tear down the house and do something else with the property then you wont be able to get a residential loan because you are going to tear down the bank's collateral and then do something else which is definitely against the rules. 

 Hey Jacob, thanks for the insight. Yes, the price is way over what I could get if it were residential. I f I were to convert the place to non-residential afterwards or do like a ground lease do you know if that would affect the loan? It's investment but it's not habitable as a residential at that point.

 Unfortunately if you are planning on doing anything with the property other than living in it or having a residential rental a residential loan is not going to work here. You would probably have to lie to the bank to even get a residential loan and then if they caught wind of what you were doing they would probably just call your loan. If you are trying to make it a place of business I would recommend looking into either an SBA loan or a commercial loan, or private lending.