Any way to get a mortgage on a 5-unit as a residential property? (financing, Los Angeles)

[eviltwin]

I have a 5-unit house with rental apartments. The 4-unit cutoff feels so arbitrary (though I know they have to make a cutoff somewhere). I have considered combining two of the units but I wanted, before I did this, to ask how much this would actually get scrutinized.

In other words, if I applied for a residential mortgage as a 4-unit, would they do the appraisal and then say it is 5 and then my mortgage would get declined?

[ShanetheMortgageMan]

To answer your question in the body of your post, "yes".

On the flip side, I've tried 13 different commercial lenders in the Los Angeles area trying to find one who would do commercial on a 4-unit and haven't found anyone.

How do you plan on combining two of the units? What is the issue with commercial financing on the property? Does it not cash flow well?

[chet everett]

Shane's experience is parallel to my own in the Chicago area. I tried to help a buddy that is massively underwater on a mid sized commercial residential unit and I got nothing. Our strategy now is to focus on private finance, but since he bought the place with the intent of making it into condos we just about need to create two separate LLCs to handle that and that scares people...

If the OP can REALLY down convert like a one bedroom and a two into one legitmate three bedroom that looks like the typical on-site owner's place that ought o fly, but if the place is set up so that the combined unit is going to scream "rule breaker" don't bother. I mean lenders are not stupid. A unit with five bedrooms, two kitchens, a separate entrance is NOT going to get funded.

Btw how you gonna do the change BEFORE appraisal?

[eviltwin]

Thanks for the replies. I actually don't need the financing. I just think money is as cheap as it's ever going to get and so wanted to leverage up the property in anticipation of massive inflation which I believe is coming. I'm not going to bother based on what I'm hearing about the difficulty of obtaining financing. Cash flow is excellent on the property.