Should I use a commercial loan for my first property?

[Matt Hurley]

Hey y'all! First time poster (and buyer), scoured the forums but couldn't quite find someone with my situation I could refer to. Apologies in advance if this is a double post or in the wrong category. I came across a fantastic opportunity, but was bummed to find out that the property was zoned commercial and therefore not traditionally financeable. This would be my first home, do I move on to a more basic first place or do I stick it out and fight for this one? The location is fantastic, the numbers look good, is it worth going down the commercial road to finance my first property? 

Me: First time home buyer, goal of owning a minimum of 5 - 10 income properties to achieve my financial goals. I have 5+ years managing multiple Airbnb locations in Brooklyn and feel confident I can manage a property I own.

Current Financials: Between my business partner and I, we're currently pre-approved for a $280k trad. mortgage. Both have high credit scores

Property Goals: Positively contribute to the growth and recovery of SE Michigan

The Property: 

Type: Quadplex with Attached Commercial unit

Location: SE Michigan, 20 min commute from either Detroit or Ann Arbor

Asking Price: $269,000

Repairs: $20K max (tear down of a barn that needs to happen within the next 5 years and maybe a kitchen rebuild)

Approach: House Hack for 1-2 yrs

Property Income: $517/mo. after expenses while house hacking, $1,017/mo. after I leave

Cash on Cash ROI: 15.9%

Numbers I used to calculate this: ARV $269k (to be super conservative), $3k closing cost, $20k repair, 20% down with a 4.8%APR amortized over 30yr., Taxes $7779/yr. (actual), Rent $3500/mo (after I leave, actual and by sq. ft. comps for rentals in this area), $200/mo other monthly rent (garage space rental actual), Vacancy 3%, R&M 9%, Cap Ex 3%, Management 10%, Annual Income Growth 2%, Annual PV Growth 2% (super conservative, this area is currently expected to be 5%-8% in the next 5 years), Annual Expense growth 2%, Sales Expense 9%)

Any thoughts appreciated. Even if it's about the numbers I used to calculate this deal. Thank you all! 

[Mark Bookhagen]

With a commercial mort, you'll need to re-calc your amort with 20-years (not 30). Other than that, go for it! One thing you'll want to check is if you're planning on selling within 5 years and want to use the the Home Sale Tax Exclusion - I'm not sure if it applies to commercial property.