Having trouble getting loan because the tenant is a nursing home

[Tamas Z.]

Hey all,

Would love some advice. I'm trying to purchase a residential property that has an existing tenant, which is running an adult family home business from the house, while also living there. It's a large property.

I got a couple of loan applications rejected because apparently, any lender under Fannie Mae has a rule against lending for purchase of a property where the tenant is a caretaker. This is because Washington State has a lot of eviction protections for those kinds of organizations.

My understanding is that if I defect on the loan, the lender would have a really hard time clearing out the house, and they don't want to shoulder the risk of having to deal with that.

That makes sense, but two things don't make sense, and they haven't been able to coherently explain it to me:

1) They say that this is only an issue because I am not operating the business. If I were more than just the landlord/property owner, and got involved with the business, they'd be able to go through with the loan. How is that different? If I defect, they STILL would have to deal with the fact that the care facility is there, so I'd be able to squat a long time, just like the business would if it's not operated by me.

2) How is this any different than if I were to purchase an empty property, and then accept an adult family care home as a tenant after the fact? It's the EXACT same situation once that tenant moves in, and there's nothing the bank can do, since AFAIK they don't get a say on who I accept as a tenant after I purchase the building.

Ok, with that out of the way, I'd love to hear some insights on where to get a loan for this kind of situation (Freddie Mac lenders? Some sort of special circumstances lender?) And should I expect unreasonably high interest rates from lenders that will process the loan? What would the more experience real estate investors here do in this situation?

Thanks!