Understanding Mixed-Use Property Loans
Mixed-use property loans provide financing for buildings that combine more than one real estate use, such as residential apartments located above retail storefronts, offices, restaurants, or other commercial spaces.
Because these properties produce income from multiple sources, underwriting may require a detailed review of both the residential and commercial components.
Financing may be used to
- Purchase a mixed-use property
- Refinance existing debt
- Renovate residential units
- Improve retail or office space
- Fund tenant improvements
- Complete lease-up
- Reposition an underperforming building
- Access equity for other investments
- Construct a new mixed-use development
What Funding Sources May Review
Lenders may evaluate the percentage of residential and commercial space, property location, tenant mix, lease terms, occupancy, rent roll, operating history, net operating income, condition, zoning, and market demand.
Important Program Considerations
The commercial portion can have a meaningful effect on the available financing. Properties with stable, creditworthy commercial tenants and diversified income may be viewed differently from properties with vacant storefronts, short-term leases, or specialized commercial uses.
Properties requiring repairs, tenant improvements, or lease-up may be better suited for bridge financing before transitioning into a permanent loan after stabilization.
Information to Prepare
To strengthen a request, borrowers should provide a clear breakdown of the property’s residential units, commercial spaces, current tenants, lease expiration dates, income, expenses, proposed improvements, and future operating plan.
For review, provide the property value or purchase price, residential unit count, commercial square footage, occupancy, annual income, existing debt, requested financing, renovation needs, and proposed repayment or refinance strategy.