building puchase

Hi all, Here is what I want to do..There’s a building that is part of an estate sale in my nabe. I feel like it is a good price..But its complicated. What I would like to do is sell our two family and buy this 5 family building. Then turn two floors of it into a dream apartment and leave a two bedroom rental. But since it is a five family – I have to get a commercial loan. Is it possible to get a commercial loan for the purchase..then redesignate the building as a 2 or 3 family – then refinance with a traditional home loan at a much better rate? Is it worth it? anyone ever doen such a thing? any recomendations on getting a loan for a 5 family? thanks!

bkdad

in Real Estate - Sales 13 years and 3 months ago

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bparc | 13 years and 3 months ago

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I second the recommendation of talking to Barry Koven at Wells Fargo.  He’s helped a number of our clients with 203K loans.  If you go that route it will certainly simplify the mortgage situation in many respects but it will mean that you have to have architectural drawings, a reasonably accurate cost estimate and a GC contracted to do the construction before you get mortgage approval.  Getting all that done withinn the tight time constraints sometimes demanded by the purchaser/contract can be stressful but we have worked on a number of these jobs and have a system that works well to get everything pulled together quickly.  If you want to talk through the whole process at all feel free to call me any time.  Talia Braude, Braude Pankiewicz Architects, 347.871.8597.

BKsearch | 13 years and 3 months ago

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Barry Koven at Wells Fargo is a great 203K resource. Give him a call. He’s done a great job for many on the forum and started us (even though we never finished) on a 203k. https://www.wfhm.com/loans/barry-koven/index_reno.page

BKsearch | 13 years and 3 months ago

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Thats correct, up to 4 families after the renovation. You aren’t limited in your “before” units if I remember correctly because the loan is based on your after renovation occupancy and after renovation value. They’ll even do live/work loans. Again, I’d check with a 203k broker before doing a commercial loan.

BKsearch | 13 years and 3 months ago

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I believe you can use a 203K FHA loan to convert a 5 family to 3 family and avoid the commercial loan completely. Obviously this option comes with certain restrictions but it may work for you. Talk to your broker about that as well.

Bklnite | 13 years and 3 months ago

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Haven’t done it but it’s possible to get a commercial loan and then re-fi after you’ve gone through what I expect would be a long and expensive process to change it from 5- to 2- or 3- family. Note that typical terms for a commercial loan are 5 years with a fixed interest rate, renewable for 5 years, with 30 year amortization, and 5/4/3/1 pre-payment penalties – that is, 5% of loan balance if you pay off (or refi) in the first year, etc., 4% 2nd year, etc., so that could be another cost on top of everything else. I’d talk to a mortgage broker who does both commercial and residential about the financing (as well as an architect about the feasibility of converting the use).