If the restaurant/commercial space deteriorates, who is responsible for that? The HOA is responsible for their portion of the building (I assume) but usually an HOA does not have to "deal" with any other structure. If you have two parties disagreeing (HOA vs Restaurant/Commercial landlord) about how to adequately maintain the building all parties may suffer. For instance, the landlord is having trouble renting the space to the perfect commercial tenant. So they make a concession to the new tenant to somehow alter the appearance/structure/drainage/etc. of the bottom floor. What if one of those changes has a negative effect on the residential section of the building? How does your HOA respond?

You will have pros and cons with any condo . . . you just have to be able to sleep at night with the cons.

Good luck!

Jeff Larabee
jeff@jefflarabee.com

VENTILATION!

Be sure that there is proper ventilation in the restaurant downstairs.

Nothing is more disturbing then finding that the "aromas" from the restaurant have settled into your home - furnishings and drapes.

If it was a cookie bakery - well - it may smell nice ...

If an Indian Restaurant moves in - you may have "Curried Couch" syndrome.

Opinions aside, having a commercial space on the first floor of a building with residential units above can pose difficulties for a buyer that wishes to obtain financing to purchase a residential unit above the restaurant.

If the commercial space has a square footage amount in excess of 20% of the total building square footage then the residential units above become "unwarrantable" meaning that the residential units above do not qualify for freddie mac and fannie mae backed financing. If a unit is unwarrantable, financing becomes exponentially tough when buying a unit. There is a way around this rule but it's a pain...

In addition, if there are less than 5 units in the whole building then that may make financing more difficult as banks like to see more than 5 residential units in an association.

Keep in mind that if more than 15% of units in an association are delinquent on their assessments, the remaining units become "unwarrantable" for financing. In an association with a small number of units, if one unit stops paying assessments, then this may ruin it for everyone else when they go to sell.

I hope this helps

I can just imagine being in that condo. You have the windows open to a nice spring breeze. Thinking about losing a little weight and all of a sudden that restaurant smell comes up and makes you oh so hungry. The diet is quickly forgotten as the food just smells so good.

Actually, many restaurants up here do give off that cooking food smell. I can imagine that would almost be a constant presence with you. I would rather buy something that did not have that restaurant. It will increase traffic in your area. It will bring a lot of people around and some may not be completely honest.

I would pass and find something similar without that commercial presence. Naturally, the choice is yours. It has plusses and minuses. For me, I would not like the setup.

Fannie Mae and FHA require that total commerical sqft is less than 20% of the total Net Sellable Sqft of the building. This does not include common area sqft.

It depends on how many floors are in the building. In high rises in downtown Chicago it is not unusual to have a restaurant , coffee bar or a grocer in the building. Actually some occupants like it. A place to eat and drink. I personally would not like to be in the unit right above any food establishment because of the smell...But it depends on what kind of restaurant it is.

One word: Vermin. Oops, it wants more than one. Restaurants typically have pest problems, anything from ants to roaches to mice and rats. Usually they are managed but not erradicated. You will have them too.

Firstimebuyer, it really depends.

Is the building you are looking at established or newer? Is the restaurant one that has been there for many years? Has this unit been for sale a long time, is it vacant, what about the other units in the building - occupied or vacant? Other businesses at the street level of this building? Are they doing well? Are there empty storefonts at street level in this building?

Will the restaurant bring more noise into your unit? What about smells? Smells might make you hungry, or you might get sick of them in a short while too.

I sold a condo unit in Seattle right above, and directly next door to a pub. The buyer was young, and loved the idea of being able to look over his deck and see if there was a crowd on the pub's deck below. There was a noise agreement in place, and he's still there after several years, and the pub is also still there ... so it must be a pretty decent relationship.

I think there are a lot of mixed use residential and commercial buildings, and if the restaurant in question isn't a fast food or really strong smell restaurant, I think it might be kind of fun to be so close. For example, I don't think I could ever grow tired of smelling Italian food .... but I don't think I coud stand the smell of fish and chips for more than 2 hours ... !

Everyone is different, and the market will set a price for something that the majority of buyers won't buy. You could be getting a bargain, and only you can answer the question of "how do you personally feel?"

The issue is not aesthetics, it is financing. Before you make an offer, talk to your lender. They will need to know-
1. The percentage of the total square footage of the building the commercial space occupies.
2. Are these spaces part of the association
3. How many floors are there of residential units
4. How many residential units are there in the building
5. is it FHA approved?

Find out before you start if you can get a loan for the condo, and if you can, what is the likelihood other potential buyers can. The changing landscape of financing has made some of these buildings very difficult to have listings in because of the lack of financing options for buyers.
Any building without an FHA approval is going to require more money down, a higher credit score for a borrower and that means fewer potential future buyers for you when you want to sell. in a market like the one we are in, that makes for a tougher sell.
Save yourself the time involved in negotiating a sale you will not complete, and the expenses of an appraisal, inspection and attorney all to find out this is not right place for your loan, let alone you.

Dave

Well, in short, it scares people away. There's a reason why you're curious about it as a buyer.. and if you're curious about it, most other people will be as well. I hate to say it but I wouldn't recommend buying a unit above a restaurant. I just sold a condo above a commercial space, and the buyers made the current condo association legally change the condo docs (with the State of Illinois) to not every allow for a restaurant to go into the commercial space on the ground floor. They wouldnt have bought the condo if it were for a restaurant downstairs. Some of the concerns I've heard is that restaurant garbage attracts rats... restaurants can be loud.. and depending on the cuisine can have a very strong smell.
If you have any other questions, I'm happy to give you another honest answer:)

It's sounds like a resort set up inside of a home kind've like Whistler, Seaside, Anaheim, etc. I think re-sell would be challenging.....IMO

Does your condo come with a parking spot? If not parking is a concern. And if it does, it will be a concern for your guests. The noise, smell, crowds, bugs, etc would all be drawbacks. But hey, if you OWN the restaurant, it be a great buy!!

Matt Laricy
Americorp Real Estate
Brokers Associate, e-PRO
mlaricy@americorpre.com
708-250-2696

Due to the lending restrictions, it may be difficult to lend on such a unit. This would depend on the percentage of commercial space to residential. If obtaining a loan on the unit is difficult, this could have a negative affect on any potential buyers and thus could decrease the value of the condo.

Now, if in the case that it will not have an effect on a lending standpoint, I would say its more of a personal preference. Also, if the ground level is a restaurant and you are right above it, you might have a permanent scent of their food throughout your unit.

Good Luck in your search!

Cherrie Catama
Newman Realty
773.490.3437 Phone

In this market (Chicago), having any food service on the ground level tends to be somewhat of a negative for many people. Issues are the constant smell, noise, potential bug problem and just negative curb appeal. It is actually unusual to see that combination as most condo buildings have food service restrictions in the bylaws.
In addition, with the current credit crisis, Fannie Mae Guidelines restrict the % of the units that can be commercial vs residential so it might be a bit more difficult to get a loan.

Hi there, in my opinion, anything that affects the senses will affect value - either positively or negatively. So visit the building at various times of day - and the unit you are considering - check out the affect on the sounds, smells, cleanliness and traffic implications of the restaurant on the ground level. If it causes you to pause, it will likely do the same to a future buyer. But taking the time to do your own research/due diligence is always good.

Best of luck,
Jeanne Feenick
Unwavering Commitment to Service
My Blog: http://www.trulia.com/blog/jeanne_feenick_-_new_jersey/