Financing Duplex New Construction on Commercial Lot

[Austin McCall]

Hey guys! 

So I have a property that is 100% paid for in a downtown area of Paso Robles, CA. The property has an old Victorian style house on the front that has been used as a hair salon for the past 27 years. The rear of the lot is huge and I am looking into constructing a duplex on the back of it. I have gotten approval from the city planners that I am zoned to have this mixed use on the property.

I have asked a few loan officers and talked to a local bank about financing the construction and the mortgage after completion. All of them are saying that I will have to do a private money for construction and then a commercial loan after completion due to the commercial use of existing building. The square footage of the duplex will be larger than that of the commercial/old Victorian home on the front of the lot. Or that I should split the lot from the commercial, but then I would need to have the city run new water and sewer along with new electrical for the duplex.

I have thought about taking a loan off the equity from owning the lot outright, but that won't cover the cost of the construction.

Do you guys have any thoughts about getting creative here? Can I take out an FHA 203k? I will be living in one of the duplex units.

Thanks in advance!