Mixed Use 2 to 4 unit Little Known Loan

I wanted to contribute to the BP community something that I think is not generally known on financing a small, 1 to 4 unit, commercial & residential building.  Alert :  It has to be owner occupied for 12 months. Having said that what I have done for clients is use an FHA 203k loan to secure 30 year, low rate financing for 2 to 4 unit commercial & residential buildings. The key rule is that the commercial area can be no more than 49% of total square footage and residential area has to be at least 51% of square footage.  You can remove common hallways, stairways etc. from the commercial 49% so they frequently will meet the split rule. 

Advantage over commercial loans is down payment as little as 3.50% and a 30 year amortization at today's low rates, in the low fours as I write this. No pre-payment penalty either. You do have to have a rehab dollar component. That means say $5000 added to the loan for some type of updating, painting or rehab even it doesn't really need any. Alert: No rehab dollars can be spent on the commercial piece, only common areas or residential piece and commercial space must already be usable, in good condition.

Also there has to be like kind sales comparables available to set appraised value in the area for this type of property.

Advantage here is that a normal Commercial loan is based on the current case flow of the property rather than the buyers good credit score/income/assets etc. But this loan allows a vacant mixed use property not generating ANY income to be financed. Something a commercial lender generally will not do. It is called FHA 203k. I have a story in my own Blog about them. 

I recently had client buy a 2 unit mixed use this way that was vacant. The front half is commercial and he plans to open a business there later. He lives in the back residential portion. He added some rehab dollars to the loan to fix a few minor issues in the residential portion. The commercial portion was fine just the way it is. 

Im happy to answer questions about how this works.