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 can be short-term as well as permanent with terms between 6 months and 30 years.
How Does Mixed Use Development Financing Work?
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 every building that has at least two units with different zoning can be accepted 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 with no more than 40% of its earnings coming from the commercial spaces, and it has more than five residential units, you could be eligible for a multifamily loan 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.|
Here are the different types of mixed use loans and some helpful details:
Government Backed Loans
The government actually backs certain mixed-use loans, namely USDA rural development business loans, and SBA 7a and SBA 504. Such kind of mixed use development financing is permanent, and its terms range from 10 to 30 years. 25%, and you need to use no less than 51% of the mixed-use building. Additionally, SBA 504 loans can be used to fund construction and renovation projects.
Commercial Loans Commercial mixed use loans are the regular loans that banks and lenders, traditional and online, offer. Interest rates for these loans range from 4% to 6%, with 15 to 30 years as the term. They also usually require mixed use buildings to be in good condition before they provide financing. However, the owner is not required to use the building with these loans.
There are many types of mixed use development financing, including, among several others, private money loans and commercial bridge loans. The terms for these short-term loans range from 6 months to 6 years, and their interest rates begin at 4%, going all the way up to 12%. Short-term mixed use development financing comes in handy for a variety of reasons, such as:
Competition with all-cash buyers
Getting a mixed use building if you want to refinance to a permanent loan
If you don’t qualify for a permanent mixed use loan because of personal requirements
Purchase and renovation of a mixed use building in compromised condition
When refinancing to a permanent loan upon expiration of the term