Real estate investors and business owners can use mixed use development financing to help them fund mixed use buildings. Mixed use buildings eligible for financing usually have several units zoned for various purposes, such as commercial, industrial, cultural, 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
Mixed use loans are any combination of various kinds of loans, from commercial to hard money to permanent construction and lots more. Nearly every building that has at least two units with different zoning can be accepted for a mixed use loan. Generally though, in every mixed use building, there is at least one residential and one commercial unit that serves as-as a live/work space or 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.|
The following are the different types of mixed use loans along with some handy details:
Government Backed Loans
The government actually backs certain mixed-use loans, namely USDA rural development business loans, and SBA 7a and SBA 504. This type of mixed use development financing is permanent and has 10 to 30-year terms. 25% and they usually require mixed-use buildings to have 51% occupancy of your business. Moreover, SBA 504 loans can be used for financing construction and renovations.
Commercial Loans Commercial mixed use loans are the typical loans provided by brick-and-mortar and online banks, and by other lenders. These loans have terms between 15 to 30 years and interest rates in the range of 4% to 6%. Mixed use buildings should also be in good shape before financing. However, the owner is not required to use the building with these loans.
There are different kinds of mixed use development financing – for example, hard money loans and other private money loans, commercial bridge loans, and more. 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%. There are various reasons one might apply for a short-term mixed use development financing, but here are the most common:
Competition 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
Buying and renovating a mixed use building that is in poor shape
When you refinance to a permanent loan as the term ends