Commercial lending on 4-plex w/ two ADU units (6 units total)

[Kevin Z.]

Hi,

Sorry if this has been covered before. The only thread I could find on this topic was pretty old ...

I have a 4 unit building in Los Angeles that I am considering adding two additional ADU units. I have heard mixed answers to the question of if I build these two accessory units, will I have to use commercial finance going forward, and or will this limit my buyer pool to those with commercial lending?

The bulk of the information I have seen is that we are in a sort of grey area, especially because the ADU laws around apartment buildings are fairly new in Los Angeles. Some have said that because these are accessory units not physically connected to the existing building that I can (i) maintain my current residential financing and (ii) I should not need to use commercial financing should I wish to refi/ a future buyer should be able to get a conventional mortgage. Others have advised that no, it will be considered larger than 4 units and thus require commercial underwriting/ loan.

Does anyone have any practical experience with this?  I will certainly consult with my mortgage broker when I am closer to pulling the trigger but am also hoping for a wider pool of experience.

Thank you very much!