Buying a commercial building to live in.

braxton357

braxton357

Robot
Joined
Apr 6, 2005
Location
Morganton
Some of you might have some insight on this, I've not done a whole lot of research on it and don't want to look like a dumbass when talking to a bank.
So our new zoning regs make it virtually impossible to build anything but a 2 car garage that matches your home in city limits and people around here aren't fans of garages so the homes for sale the past year with anything more than a 24x20 are non-existant.
Anyway, I've found an old business/warehouse with a few acres in town for sale--new zoning districts put it in light residential now which kills the business aspect but I would like to buy it and tear the offices out/frame up an "apartment" inside part of it.
My question is, I know nothing about commercial loans. It's considered an office/warehouse on the tax registry, I know what I'm qualified for as far as a standard home loan but not sure if that would apply here?
Anyone ever bought a commercial building for private use before? Really would just like to hear if this is something that will be a huge hassle before I start getting more serious about it.
 
I think zoning regulations might hinder you living in a warehouse/commercial building as well. Now, that is much me remembering a thread on pirate about it. So, who knows. But I'd look into that side of it as well.
 
I would call your local planning and zoning department as they will be able to give you the details of the requirements as every city is different.

If the building is in a commercial location and a majority of the space is business use and the living quarters are separated appropriately, then it would likely be a small hurdle to get it approved. If most of the facility is residence in a commercial location, then it may prove more difficult.

It's likely you will need an architect well versed in your local regulations with detailed plans to get zoning to buy off on it. You may have to sit in front of City Council for approval. Every town is different.
 
Its zoned light residential?
You want to use it as a residence. No problem.


If that should say "Light commercial" then you have other options.
If you opened a 24 hour car baby sitting business and needed living quarters for the employees...
No one says the business use has to be profitable.
 
paradisePWoffrd said:
I don't think he gets on here, but John Eller (Extreme Machines) lived(s) in one in Hickory for a long time.
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Good thinking, I might have to give John a call. He was definitely in an industrial area.


Ron said:
Its zoned light residential?
You want to use it as a residence. No problem.


If that should say "Light commercial" then you have other options.
If you opened a 24 hour car baby sitting business and needed living quarters for the employees...
No one says the business use has to be profitable.
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The land/building was rezoned to light residential which is partly why I'm looking at it as it's going "cheap" for what it is. I would rather the city know as little as possible about what I'm doing but I guess I'll have to make some calls. My main concern is with it having been a commercial building that I'll not be able to get a standard home loan, I would imagine a loan for a business is going to want a lot more money down.
 
Based on Henderson County info

My shop is in a business park where some tenants monitor their own businesses 24 hours a day...if you know what I mean.
From talking to our landlord, as long as it's just you there it really isn't a big deal. You start adding other permanent residents and it can get tricky.
If it were me, I wouldn't wake a sleeping dog by saying too much about permanently living there.
 
braxton357 said:
My main concern is with it having been a commercial building that I'll not be able to get a standard home loan, I would imagine a loan for a business is going to want a lot more money down.
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Call your potential lender and just ask them.
My bet is that what they care about really is just the likelihood of it accruing vs losing value in comparison to what is borrowed. If its for your primary residence, in a residential zone, it will be a residential loan. That much is simple - the open question is whether their appraiser will lowball the value due to the unknowns w/ the rezoning and future sales etc.
 
A lender is going to want to make sure all your Ts are crossed and Is dotted meaning the zoning and use must comply.

Residential codes are different than commercial. So, it will likely need to be brought up to standard residential codes before it's usable as a residence and before a bank would finance.
 
rockcity said:
A lender is going to want to make sure all your Ts are crossed and Is dotted meaning the zoning and use must comply.

Residential codes are different than commercial. So, it will likely need to be brought up to standard residential codes before it's usable as a residence and before a bank would finance.
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Wouldn't it be grandfathered?
People buy houses all the time where they met code back when they were built but don't today. According to the logic above, there would be no houses that have knob and tooth wiring in them at all b/c they would have all had to have been changed when bought.
Besides aren't most codes more stringent for commercial than residential?
 
RatLabGuy said:
Wouldn't it be grandfathered?
People buy houses all the time where they met code back when they were built but don't today. According to the logic above, there would be no houses that have knob and tooth wiring in them at all b/c they would have all had to have been changed when bought.
Besides aren't most codes more stringent for commercial than residential?
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If the building has office spaces in it now and has to remodeled to be a residence that part will all have to be brought up to current code just like any remodel job. And I believe if over 50% is being remodeled then the whole building has to be brought to code
 
Commercial is completely different than residential. Repurposing a commercial property not intended for permanent habitation to residential would typically require upgrading to meet residential codes. Commercial and residential codes are not one in the same.
 
rockcity said:
Commercial is completely different than residential. Repurposing a commercial property not intended for permanent habitation to residential would typically require upgrading to meet residential codes. Commercial and residential codes are not one in the same.
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All that is clear, yes.
But why would a bank care, or even know about any of it?
What the bank cares about is (1) that they will recoup their money + some, and (2) that their loan fits the law.
They don't know what you're going to do with the property.
(basically) All the bank gets is an address, a credit app, and an appraisal. They don't send somebody to the house to take pictures or check code-worthiness. So it comes down to the appraisal.
Unless there is something on NC titles that designates the zoning, then that could be interesting. You'd want to be sure whatt he bank gets is the "new" version that says its residential. As long as everything matches, the bank won't know anything.

But clearly the best thing to do here is just call the lender and ask them. You don't have to give a name or the address to find out. Same w/ the county.
 
I can assure you the bank will care. ;)

If you buy a mechanic shop to live in, the bank is going to be very interested in how that happens because 1. Thy have to protect their interests. 2. Loan types are different between residences and commercial property.

If it's listed as residential but doesn't meet code because it was formally a commercial building, then it's basically worthless to the bank and their underwriters likely won't secure the loan.

If you get a commercial loan, then the underwriting requirements are much different and each bank has their own set of products.

The property will be inspected, the bank will require that. The inspection (and appraisal) will likely identify multiple deficiencies in the commercial building to be considered residential which must be remedied before purchase.
 
RatLabGuy said:
What the bank cares about is (1) that they will recoup their money + some, and (2) that their loan fits the law.
They don't know what you're going to do with the property.
(basically) All the bank gets is an address, a credit app, and an appraisal. They don't send somebody to the house to take pictures or check code-worthiness. So it comes down to the appraisal.
Unless there is something on NC titles that designates the zoning, then that could be interesting. You'd want to be sure whatt he bank gets is the "new" version that says its residential. As long as everything matches, the bank won't know anything.
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It has to appraise, and you can't get a residential appraisal on a structure that doesn't have any living space.

And even if it has some sort of apartment with kitchenette/bath/etc, it still needs to appraise. Which means there have to be comps. And it sounds like there probably aren't.

The bank loan is the single biggest wildcard in this whole arrangement. Gotta be able to finance it, and that means satisfying the bank's requirements (homeowner's insurance may be another gotcha).

The city, zoning, the specifics of renovating the structure to make it habitable are all minor in comparison.
 
Loganwayne said:
I believe if over 50% is being remodeled then the whole building has to be brought to code
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Winner winner chicken dinner.

You might - maybe - be able to do it under the rehab code. But it's going to be a pain in the ass either way.
 
Most commercial loans are balloons. Banks will not loan a traditional loan on a commercial property. At least that has been my experience.
 
ghost said:
Most commercial loans are balloons. Banks will not loan a traditional loan on a commercial property. At least that has been my experience.
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And if the bank has call provisions in the loan (im sure they would) then if they call it and you don't have the $, well you'll be out on the street pretty quick. :(


If you have a commercial loan, the terms are generally 5-10 years and require 30% or more of your own $ with significant tax returns to back up repayment.
 
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rockcity said:
I can assure you the bank will care. ;)

If you buy a mechanic shop to live in, the bank is going to be very interested in how that happens because 1. Thy have to protect their interests. 2. Loan types are different between residences and commercial property.

If it's listed as residential but doesn't meet code because it was formally a commercial building, then it's basically worthless to the bank and their underwriters likely won't secure the loan.

If you get a commercial loan, then the underwriting requirements are much different and each bank has their own set of products.

The property will be inspected, the bank will require that. The inspection (and appraisal) will likely identify multiple deficiencies in the commercial building to be considered residential which must be remedied before purchase.
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This sums it up pretty good. The bank cares more than you can imagine. The appraiser is going to value residential property using a sales approach (comps in the area) the commercial property will valued by an income approach. This will be disclosed to the bank.

Getting a home loan to buy a warehouse... Not gonna happen.
 
Zoning shouldn't be difficult. It's zoned residential so it can be used for residential purposes just fine I would imagine. I can almost guarantee that the Inspections department will request engineered designs moving forward though.
 
braxton357 said:
Some of you might have some insight on this, I've not done a whole lot of research on it and don't want to look like a dumbass when talking to a bank.
So our new zoning regs make it virtually impossible to build anything but a 2 car garage that matches your home in city limits and people around here aren't fans of garages so the homes for sale the past year with anything more than a 24x20 are non-existant.
Anyway, I've found an old business/warehouse with a few acres in town for sale--new zoning districts put it in light residential now which kills the business aspect but I would like to buy it and tear the offices out/frame up an "apartment" inside part of it.
My question is, I know nothing about commercial loans. It's considered an office/warehouse on the tax registry, I know what I'm qualified for as far as a standard home loan but not sure if that would apply here?
Anyone ever bought a commercial building for private use before? Really would just like to hear if this is something that will be a huge hassle before I start getting more serious about it.
Click to expand...

Well I can tell you from experience that it's not that hard to do making living quaters in a Comercial building cause I did just that...me and my wife was in the process building an apartment in my shop...I had the lower level walls framed and wired and was ready to set the floor trusses. . We ran across a good buy in a new house and I sold the shop and moved in the house...but If we had it to do over we would have stayed in the shop...I will tell you this what you do inside your 4 walls is your business as far as I'm concerned. ...good luck with your project. ..
 
Off topic but people will live where ever they want. I used to rent a shop with @earlybronco and we found out that a guy made an apartment in the shop next door and lived in it. This was in a public storage type place not a true commercial building. Funny part was dude drove an H1 and went around town acting like he was a big fish when it was all show and he was broke as crap.
 
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