How To Finance Mixed Use Properties

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How To Finance Mixed Use Properties

In this episode of the Investor Financing Podcast, Beau talks about financing mixed-use properties.

What is a mixed use property?

Mixed-use property is a type of real estate that combines commercial, residential--and sometimes--industrial units. This allows investors to take advantage of different types of property in a single investment.

Mixed-use developments often contain complementary properties, like a hotel that also houses retail stores and a gym. Or an apartment complex within walking distance of restaurants and local businesses.

These developments are more convenient to residents since they can reduce or even eliminate the need to own a car. And from an investment perspective, a multi-use property often generates better long-term performance and creates higher returns.

Mixed-use property can be a challenge to finance, due to the nature of the different properties being financed simultaneously.

Mixed-use property financing applies to properties that are comprised of multiple units zoned for different uses, including residential, commercial, industrial and institutional. Almost any building with at least two units of different usage qualifies for mixed-use financing.


Both business owners and real estate investors may seek a mixed-use property loan. Business owners will often live in one of the residential units and operate out of the commercial space while real estate investors will typically act as the landlord for both the residential and commercial tenants.

Conventional loans underwritten to Fannie Mae or Freddie Mac guidelines are an option as long as the loan amount meets conventional limits. There are a few things that are different about financing a mixed-use unit but one of the more important is how much space is dedicated to commercial and how much to residential. Remember, Fannie and Freddie primarily buy residential loans and leave commercial financing to others. That said, there is a limit on how much space can be dedicated to commercial. These guidelines require that no more than 25% of the livable space be dedicated to commercial. For instance, if the building is say 15,000 square feet of livable space, then commercial occupancy is limited to 25% of 15,000, or 3,750 square feet. These loans also ask the borrowers both occupy the building as a primary residence and own and operate the business or businesses located in the building.

FHA loans can also be an option. As with any government-backed loan, FHA also requires the borrowers to occupy the property. But FHA allows for more space to be labeled as commercial. Up to 49% of the livable area can be commercial. Note, the square footage assessment does not apply to parking garages or similar areas.

To find out more, watch the video! If you want some guidance, set up an appointment with Beau - https://calendly.com/beaueckstein/15-minute-meeting-ifp

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