5 unit Commercial Refinancing with an Owner Occupied 4 unit loan?

[Christopher Canzoneri]

Hello Everyone!

I purchased a home last year with a 5% down Convention Freddie Mac Home Possible Loan. This property as viewed by the town legally is a 5 family home. Although, I was able to secure an owner occupied loan on the home due to how 2 of the units are oriented. The units have a common door where there is a small foyer area. There is one unit at ground level and then another door up a flight of stairs. The units have separate electric meters, unit numbers at the post office and generally function and appear as two separate units. The town the home is located in shows the property has a certificate of occupancy for 5 units. The bank and appraiser accepted this situation as well.

I have been significantly increasing the condition and income of the home. Before I moved in the home, the gross rent was $4,300 and when I finish replacing inherited tenants and remodeling, conservatively I will be realizing at least $7,100 a month in gross income. This is all while reducing the expenses through cost saving avenues. Avenues such as replacing the single 1982 oil burner with a higher efficiency boiler or possibly 5 separate mini splits. Doing all this will mean my property is worth significantly more than what I paid for it. Using a commercial NOI valuation instead of using comparable sales will allow for a significant value add, possibly double what I paid for the property depending on how the value NOI and Cap Rate.

Will there be any issues when I want to refinancing this property as a 5 family commercial? Any issues with a sale down the road? My hope is to do a cash out mortgage and use that cash to buy another multifamily property, hopefully something 5+ units. Am I missing any important details here? I appreciate any help!