Financing for owner-occupied lodging property

[Craig Jones]

Looking at a unique property which is a 4 bed / 2.5 ba main house, with what is essentially a 5 room motel semi-connected to the main house via a breezeway.  Each room has its own exterior entrance from the breezeway.

The current owners have operated it as a bed & breakfast the last 12 years, with breakfast served in the main house which is also their primary residence.

By my analysis, revenue from the 5 rooms could cover the debt service and operations of the whole property.  It’s a heavy tourism area with year round demand and tight restrictions on STRs that keep room rates high.  As a pure investment it looks okay, but with a primary residence for my family thrown in at zero additional cost, it looks really really great.  We’re interested in the possibility of continuing it as a B&B, but I think it would work fine without breakfast too.

Sellers are open to owner financing up to 20%.  The question is, who / how to finance the rest?  Residential lenders won’t consider the revenue and object to  the business use an/or partial owner financing.  Commercial lenders object to it being owner occupied.