By Mike Young
This is one of the unique aspects of a 203k loan. You can take 5, 6,
7, and 8 unit buildings which are considered "Commercial" buildings and
convert them to one to four residential units under this program.
Years ago we had such a project that was eight studios, the building had been vacant for many years, it was gutted.
All the drywall was gone, the wiring had been stripped out of the
building, and all of the copper plumbing supply lines had been removed
from the structure. Otherwise the building was in pretty good condition.
The "bones" were good, the foundation seemed to be in good shape. Even
the roof was adequate and we could easily say it had 2 years remaining
When the buyer was identified we went into action to determine just
how many units would be feasible. We determined with the borrower's
assistance that a 3-bedroom and three 4-bedroom units. The rents would
be $1500 each for the four bedroom units and the borrower could live in
the 3-bedroom unit. The rental income would be calculated at $1500 x 3 +
$1200 x 1 = $5700 then at 75% or $4,275 per month additional income to
help the buyer qualify for the loan. That is an additional $51,300 added
to the annual income.
Typically if you qualify for a SFR you may also qualify for units as
their income can be used to help you qualify for the loan. This is quite
often enough to help the borrower qualify.