22 Lessons Learned:
Understanding Mixed Use Development Financing
To fund mixed use buildings, business owners and real estate investors can rely on mixed use development financing. Financing-qualified mixed use buildings generally come with a number of units zoned for different purposes, like residential, business, institutional, etc. Mixed use loans may be simultaneously short-term and permanent with terms from 6 months to 30 years.
How Mixed Use Development Financing Operates
As its name suggests, a mixed use loan is a fusion of several kinds of loans – short-term hard money, commercial, government-backed and industrial, and more. Nearly any building that consists of no less than two units with different zoning may be good for a mixed use loan. In a mixed use building, however, there is often at least a single commercial and a single residential unit that functions as a live/work space or as an investment.
If you own a property that earns under 40% of its income from the commercial units, and it has at least five residential units, you may be considered for a multifamily or an apartment loan.
Types of Mixed Use Loans
There are several types of mixed use loans, the most common being a government-backed mortgage that comes from the SBA or USDA.|Mixed use loans come in varied forms, and the more popular type is a government-backed mortgage provided by the SBA or USDA.|Mixed use loans come in different shapes and sizes, most common of which is a government-backed mortgage from the SBA or USDA.|
The following are the different types of mixed use loans along with some handy details:
Government Backed Loans
Business loans offered by the USDA, along with SBA 7a, SBA 504, are some examples of mixed-use loans that have government backing. This type of mixed use development financing is permanent and has 10 to 30-year terms. 75% and may reach up to 8. Construction and renovation financing is also possible with SBA 504 loans.
Commercial Loans Commercial mixed use loans are the typical loans provided by brick-and-mortar and online banks, and by other lenders. Interest rates for these loans range from 4% to 6%, with 15 to 30 years as the term. One requirement is that mixed use buildings be in good condition before financing is possible. However, with these loans, the building need not be occupied by the owner.
There are different kinds of mixed use development financing – for example, hard money loans and other private money loans, commercial bridge loans, and more. These short-term loans have 6-months to 6-year terms, with interest rates of 4% to 12%. There are various reasons one might apply for a short-term mixed use development financing, but here are the most common:
Competing with all-cash buyers
Getting a mixed use building if you want to refinance to a permanent loan
If personal requirements for a permanent mixed use loan are not met
Purchase and renovation of a mixed use building in compromised condition
When refinancing to a permanent loan upon expiration of the term