Understanding Mixed Use Development Financing

Real estate investors and business owners can use mixed use development financing to help them fund mixed use buildings. 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 and at the same time permanent, terms going from 6 months to 30 years.

How Does Mixed Use Development Financing Work?

Mixed use loans are sets of various loans: short-term hard money, permanent construction, government-backed, and others. 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{eec0967cf246adfce94e31ca2e5a158048f50c784c4c262b90b55dd663ea6f71} 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.|

Below are the various types of mixed use loans and some useful 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{eec0967cf246adfce94e31ca2e5a158048f50c784c4c262b90b55dd663ea6f71}, and you need to use no less than 51{eec0967cf246adfce94e31ca2e5a158048f50c784c4c262b90b55dd663ea6f71} 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. These loans have terms between 15 to 30 years and interest rates in the range of 4{eec0967cf246adfce94e31ca2e5a158048f50c784c4c262b90b55dd663ea6f71} to 6{eec0967cf246adfce94e31ca2e5a158048f50c784c4c262b90b55dd663ea6f71}. They also usually require mixed use buildings to be in good condition before they provide financing. However, with these loans, the building need not be occupied by the owner.

Short-Term Loans

There are many types of mixed use development financing, including, among several others, private money loans and commercial bridge loans. Such short-term loans are paid at interest rates between 4{eec0967cf246adfce94e31ca2e5a158048f50c784c4c262b90b55dd663ea6f71} and 12{eec0967cf246adfce94e31ca2e5a158048f50c784c4c262b90b55dd663ea6f71}, and their terms can be anywhere from half a year to 6 years. Short-term mixed use development financing comes in handy for a variety of reasons, such as:

Competing with all-cash buyers

To prepare a mixed use building prior to refinancing to a permanent loan

If you don’t qualify for a permanent mixed use loan because of personal requirements

To buy and renovate a mixed use building in bad shape

When you refinance to a permanent loan as the term ends