Converting mixed residential commercial space

[Martin Graf]

Hello all, I’m hoping you can clear up some confusion I have regarding mixed residential properties in Philadelphia. I often come across properties which consist of a ground level commercial space with a 1-2 BR unit above. Can these properties only be financed using a commercial loan?

Financing aside, if one were to acquire a property like this, what types of obstacles should be expected in attempting to convert the commercial space into a residential unit? I imagine this involves several variables, most notably zoning.

Are potential deals like this worth it?

[Martin Graf]

Hey Dan, I've recently learned that these properties can be financed using an FHA loan. The guidelines state:

Mixed Use refers to a Property suitable for a combination of uses including any of the following: commercial, residential, retail, office or parking space. Mixed Use one-to four-unit Single Family Properties are eligible for FHA insurance, provided:

-a minimum of 51 percent of the entire building square footage is for residential use; and

-the commercial use will not affect the health and safety of the occupants of the residential Property

So it is possible, but I can't speak to how easy it is to close on a mixed-use using FHA financing.