Lenders for co-op with less than 51% occupancy.

My subject should have said "less than 51% owner occupancy".

Try GuardHill Financial (Scott Nadler) or Guaranteed Rate (Jack Kasavi) The 10% down will be tricky..

Keith Burkhardt
TBG

Thanks!

Just remember that the lending difficulty should also prompt your own hesitation. It is more difficult to get financing because the risk is increased, and perhaps more importantly hard to assess! Your purchase is at the sponsor's mercy and their financial needs will determine the building's course forward. Just like being a limited minority partner in a business, plus it's your home.

Not saying you shouldn't go forward, but be sure to think twice.

and your buyer universe is limited when you go to sell

I have lenders for this kind of loan.
Ellen Silverman
Licensed Mortgage Broker since 1990
NMLS# 60631
Esfundingco@ aol.com
Tel:212-786-9682
www.esfunding.instantlender.com

It seems like it is always a floating percentage.

Is there a formal threshold for owner occupancy?
Ive heard different percentages throughout the years.

So this will be my first purchase and I'm very inexperience when it comes to co-ops. Uptown_joe, could you elaborate on why I should be hesitant about purchasing in this building?

My current loan office from a big bank is looking to get me an exception on this property for 90% financing, but now I am hesitant due to your comments. She also told me that owner occupancy has gone down in the building in the past few years.

Two related aspects. This building may be more or less susceptible to these general concerns, depending on the specifics.

1. Part of the benefit buying into a coop is living with fellow-owners who tend to care for the place, protect their investment, are vigilant about safety and who gets into the building, and are incentivized to avoid beating up the building (because the repairs are their shared cost). Greater levels of renters tends to mean more wear and tear, turnover, occupant misbehavior, and so on. Banks prefer the former, of course, but it affects your everyday experience too.

2. My post above alluded more to the board, sponsor (aka "holder of unsold shares"), and management conditions. In a situation with <51% owner occupancy the investor-owned shares will be a big chunk of the place. That probably means multiple board seats and a big influence:
- even if sponsor members aren't an overall board majority, they might be a majority at some meetings and their positions might command sympathy from other absentee-landlord shareholders
- the sponsor's financial condition will have a heavy influence on building operations. Suppose they own 35% of shares. If they default on maintenance, or don't have the cash this year for a capital assessment, the building is in a huge hole. Need new windows? The board can't really proceed unless it knows the sponsor is on board with its share of the funds.
- the coop's own borrowing -- most coop corps have mortgages and credit lines of their own -- may be negatively affected by the owner-occupancy status, and the investment-oriented owners may push for a different borrowing strategy than the owner-occupants
- management and rules might tend to be more rental-style, for example weekend/evening move-ins and move-outs might be allowed, a different approach to building services, etc.

As crescent points out your difficulty buying in will be your difficulty selling later on; these things don't tend to change too fast and as your bank contact points out they may not change in the desirable direction.

Finally, you may decide it's all worth it for the apartment and you think it'll probably turn out ok -- but just know what you're taking on and why the banks don't usually go for it.

Sorry, looks like the post got truncated. Here it is again:
------------------

Two related aspects. This building may be more or less susceptible to these general concerns, depending on the specifics.

1. Part of the benefit buying into a coop is living with fellow-owners who tend to care for the place, protect their investment, are vigilant about safety and who gets into the building, and are incentivized to avoid beating up the building (because the repairs are their shared cost). Greater levels of renters tends to mean more wear and tear, turnover, occupant misbehavior, and so on. Banks prefer the former, of course, but it affects your everyday experience too.

2. My post above alluded more to the board, sponsor (aka "holder of unsold shares"), and management conditions. In a situation with under 51% owner occupancy the investor-owned shares will be a big chunk of the place. That probably means multiple board seats and a big influence:
- even if sponsor members aren't a board majority, they might be a majority at some meetings and their positions might command sympathy from other absentee-landlord shareholders
- the sponsor's financial condition will have a heavy influence on building operations. Suppose they own 35% of shares. If they default on maintenance, or don't have the cash this year for a capital assessment, the building is in a huge hole. Need new windows? The board isn't going to proceed unless it knows the sponsor is on board with its share of the funds.
- the coop's own borrowing -- most coop corps have mortgages and credit lines of their own -- may be negatively affected by the owner-occupancy status
- management and rules might tend to be more rental-style, for example weekend/evening move-ins and move-outs might be allowed, a different approach to building services, etc.

As crescent points out your difficulty buying in will be your difficulty selling later on; these things don't tend to change too fast and as your bank contact points out they may not change in the desirable direction.

Finally, you may decide it's all worth it for the apartment and you think it'll probably turn out ok -- but just know what you're taking on and why the banks don't usually go for it.

Great explanation and advice. Much appreciated!

5 years later I'm in the same boat. Bought in 2005 easily and now having difficulty refinancing. Any recommendations would be great. Thanks!