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When Should You Take Out A Mixed Use Loan

Updated: May 21, 2020

A mixed-use loan is a type of commercial real estate loan that helps finance a hybrid property - one that combines residential and non-residential buildings. Many people don’t realize that mixed-use properties are considered commercial real estate, so you’ll have to secure a commercial loan, not a residential loan, if you are interested in investing in a building of this sort.

Mixed-use properties can be things like gas stations, funeral homes, city buildings or retail stores. Even though you have two things going on - residential tenants and business owners - they’re often a great investment opportunity with longer term leases.

So could a mixed-use loan be what you need to move forward with your commercial investment? Here is more information about these loans and what types of situations they are best for.

How Do Mixed-Use Loans Work?

Mixed-use loans come in many different forms. For example, you can get a mixed-use property loan that is backed by the government, a bank or a private investor. While there are benefits to each type of loan, many real estate investors choose private investors because they can get quick financing. Short-term mixed-use loans include hard money loans, private money loans and commercial bridge loans.

Here are a few benefits to expect from these real estate loans:

  • Available to individuals or entities

  • Attractive interest rates as low as 9.99%

  • Flexible underwriting requirements

  • Short-term solutions, usually around 12 months

  • Fast approvals

When Should I Be Using a Mixed-Use Loan?

You can opt for a mixed-use loan any time you purchase a property that has both residential and commercial components. For example, if you want to invest in a five-story building that has residential apartments on top and office space on the bottom, this would be a good opportunity to take out a mixed-use loan.

Other reasons to request this financing are:

  • Compete with all-cash buyers. If you’re not a long-term investor, you may not have the cash upfront. However, you’re still a strong competitor if you can secure reliable financing.

  • Fix up the building before selling or renting it out. You can use a mixed-use loan to rehab or remodel the property. Once complete, you can sell the property or rent it out and pay back the loan.

  • You plan on living at the property. If you plan on living in one of the residential units while operating out of the commercial space, a mixed-use loan is a great financing option.

  • You don’t qualify for a permanent mixed-use loan. If you don’t qualify for a permanent mixed-use loan (they often go to long-term investors and business owners), you can get a short-term mixed-use loan instead.

Investing in a hybrid property is an excellent way to maximize your profits and earn steady income from residential tenants and business owners. To learn about your options for taking out a mixed-use loan with First Funding Loans, contact us today.


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