Condo Zoning Hangup - any alternative lending solutions?

[Daniel Kramer]

I had a purchase agreement written up on a condo. Before anyone comes down on condos, let's assume I ran the numbers and am confident it is a good investment. 

Original Loan Info: Conventional Residential designated as investment property, 30-year fixed, 25% down. 

My loan officer only asked the condo association for a "limited" condo questionnaire since I was putting significant amount down. Everything was smooth sailing until the underwriters rejected it due to some issues with the appraisal. The appraiser contacted the HOA himself and included in the report that the complex had a less than 50% owner occupancy ratio and that the zoning was "legal-nonconforming." My understanding of the zoning issue is that the zoning definitions were different in 1981 when the complex was built. Since the nomenclature has changed, it couldn't be rebuilt exactly as it is zoned without a rebuild letter. These two items pretty much killed it with the underwriters and now we are stuck trying to figure out how to get this thing financed.

What other options could be out there as far as portfolio or unsecured loans? This is my first "deal," so I'm not super savvy on all the loan options out there and I also don't want to let this speed bump derail the train. 

Thanks in advance!