Financing "non-owner occupied" condos?

Question

A lot of triple deckers (and two story houses) got converted not too long ago and went out to investors who rented them out. Now they are all trying to get rid of them. Some of those places are lovely but I am running into one or both of these situations:

1) One unit is for sell but the other two are rented out

2) All three units are for sell

My broker tells me that I can't get a bank to finance my unit unless the other ones are owner occupied. So now the places I like are out of reach. Why should this be a restriction? How is anyone else buying those places? $200-$270K cash in hand or what?

There must be a way around it. I'd be glad to hear it.

Thanks.

Answer 1

There is a general rule in condo financing that banks will no longer go near buildings that are not at least 50% owner occupied.

The reasoning - if more than half of the building is owned by investors... then they are much more likely to walk away from building as a few of them foreclose then a group of people who consider these units their homes.

Answer 2

The banks want the whole complex to be 65% occupied by owners.  A complex filled with renters is not desirable to buyers and depresses the selling prices.  If there are more renters, you pay a higher interest rate.  It is usually offset by the low selling price since no one can get financing to buy the units.  Bargain hard and pay a high rate.

Answer 3

in chicago, thats BS...its case by case..there are rules, like a high rise cannot be more than 30% investor owned....were talking like a 500 unit building...or that 10% cannot be owned by one guy...

theres TONS of converted two-four flats here in chicago...ive never seen my bank give any trouble to anyone looking to buy a unit in a small conversion like you are talking about...ive been  appraising those for 10 years now