Lending Guide: Loan Overview

Residential Property Types

2018-09-28T20:05:21+00:00 Loan Overview|

Trying to classify residential property types vs. commercial property types can be difficult. Private lenders and borrowers are all over the map on whether they consider structures to be residential or commercialSome define it by the size of the property, its use, its occupancy/ownership and on down the line of nuance. Beyond private lenders and borrowers, building and zoning laws also have their own vagaries and thresholds for standards between residential and commercial use, which further confuses attempts at classification.

For this reason, PMLG makes the distinction on who can be considered to live on the property: individual people or businesses.

Click the terms below to scroll to the residential property type’s description:

Apartments
Condos
Mobile home (trailer) parks
Multi-family 2-4 units
Raw land
Single-family
Vacant land

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Apartments

Buildings with five or more units, or complexes of multiple apartment buildings. The owner owns all land, buildings, individual units and amenities. You will also hear these referred to as multi-family housing (usually multi-family 5+ units).

While we talk about these as residential property because of their occupancy type, depending on your municipal zoning codes they may be classified as commercial property. Lenders who will otherwise not do commercial loans may be willing to look at apartments.

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Condos

Can be 2+ unit buildings or complexes (so includes multi-family and apartment-style structures). Condo units are owned individually, while the “landlord/property owner” owns the land, amenities, and building structure (usually everything from each unit’s exterior walls out).

Rather than classifying condos under apartments or multi-family, PMLG differentiates them further because some private lenders won’t lend if the property will not be wholly owned by the borrower. You will also want to articulate if you are looking for financing to be the “landlord” or as a unit owner. If as a unit owner, if the unit(s) will be owner-occupied or non-owner-occupied.

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Mobile home (trailer) parks

These are parks for mobile homes that are not recreational vehicles. You may be looking to own in one of two ways: You own the lots, utility systems and other park amenities while your tenants own their homes, or you own both the land and the homes. You may find private lenders willing to close just one type, so be sure to clarify.

Although these parks are residential in use, they may be zoned commercially like apartments. This kind of property is especially difficult to finance through banks, which often require high rates of regular tenancy, typically 80 percent.

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Multi-family 2-4 units

Multi-family residences include duplexes, triplexes and quadplexes, and are generally easier to find financing for than apartments since they are nearly always classified as residential.

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Raw land

Undeveloped or raw land has no utility lines, roads, building structures or pre-defined building site. Raw land can be both residential or commercial but is generally already zoned for one use or the other. Farmland, ranges and forest are sometimes classified as raw, and may be zoned either way depending on local zoning laws.

It can be difficult finding lenders willing to close raw land transactions because there is less assurance that necessary infrastructure to develop the land can be built without a great deal of added cost. Simply put, there are many more unknowns than with vacant land.

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Single-family

A single-family home may be either attached or detached. The defining factor that separates single-family from multi-family is that each residence sits on its own property lot, with its own property lines.

Attached family homes are also called townhomes, rowhouses and zero-lot-line houses, in that the residence will either share walls or have one or more walls touching the neighboring home (essentially coming right up to the edge of the property line).

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Vacant land

Different from raw land, vacant land will already have access to utilities and other improvements that make it somewhat or completely development-ready. It is easier to find private loans for vacant land due to the increase assurance that all the necessary pieces – especially utilities – are easily accessible.

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