FHA/USDA Mixed use

[Logan1111]

I have a USDA file where the house was built in 1942 and is zoned mixed use. Residential to the right, commercial to the immediate left(mini storage). The current owner lives there and has ran a daycare out of it for the last 14 years. Smaller town, commercial to the left and across the street is a tobacco store and a few empty lots. No one is banging down the doors to turn this area into a commercial hub. I have other c-3 Mixed use comparable in the file and some standard residential. I am looking to discuss what is expected for the commercial side/income side. I believe I have established that the HBU is still residential.

In the photo, light pink is mixed use, light blue and yellow is residential and red is full commercial. The argument could always be made, a small time law office, doctors office, continue as a daycare center, etc.. The interior is still SFR and nothing is out of the ordinary, other than toys and little desks in a few rooms for the kids.

Secondarily, the heat. Old floor heaters were not working, so these things have been installed as heaters in each room. Not permanent heat, so that will be a requirement.

My main concern is an argument for commercial potential. The functionality of the property is an SFR and I believe it should stay that way. I would like to hear both sides, I want to be prepared.

Thanks,

 

[Tom D]

FHA has a fixed % of allowable commercial use in the property by the owner. Did a daycare in the owner's basement. Fell into the right FHA business use percentage. With FHA, they don't care about the business. Your concern is not to be misleading in how you classify part, or all of it's use. If commercial is dead for now, then certainly residential, I'm assuming the buyer, who has to live in it, wants to use it for their business also, smart move. Highest and best use, with a hell of a workfile is residential as you say.
Every corner property in my big city had a front store. Economically, can't be done anymore.

 

[alebrewer]

Look at what the market is doing to find out what the market prefers. If places like the subject are being bought up and converted to commercial - that's potentially the H&BU. If the transition isn't happening yet - but the P&Z folks just were trying to get in front of it - likely that H&B is still residential.

 

[Logan1111]

Look at what the market is doing to find out what the market prefers. If places like the subject are being bought up and converted to commercial - that's potentially the H&BU. If the transition isn't happening yet - but the P&Z folks just were trying to get in front of it - likely that H&B is still residential.

I do not believe they are banging the doors down trying to convert. We are a mile or so outside of the "commercial center" outside of that older downtown type area where foot traffic can be a driver for commercial and conversions taking place.

 

[alebrewer]

I do not believe they are banging the doors down trying to convert. We are a mile or so outside of the "commercial center" outside of that older downtown type area where foot traffic can be a driver for commercial and conversions taking place.

So long as you have recent sales of similar type stuff, and they didn't convert after sale, you can build an argument for current as H&B. Remember that you're assessing the H&B 'as improved'.

 

[Terrel L. Shields]

If 50% commercial use is still the standard then what portion of the house is used for a daycare? That determines its eligibility for FHA/USDA loans. Determine and discuss with the client.

 

[Logan1111]

If 50% commercial use is still the standard then what portion of the house is used for a daycare? That determines its eligibility for FHA/USDA loans. Determine and discuss with the client.

Technically, sun room, living room, 1 of the 3 bedrooms, and the kitchen. The family room and kitchen are used for both the daycare and personal use. Determination is made by amount of toys, book cases, "activity areas' in these rooms.