Mixed-Use Buildings
Mixed-use property financing applies to properties that are comprised of multiple units zoned for different uses, including residential, commercial, industrial and institutional. Almost any building with at least two units of different usage qualifies for mixed-use financing. Both business owners and real estate investors may seek a mixed-use property loan. Business owners will often live in one of the residential units and operate out of the commercial space while real estate investors will typically act as the landlord for both the residential and commercial tenants. While residential tenants provide a more stable source of rental income, commercial tenants, such as ground-floor retail, are usually willing to pay more for rent. Therefore, commercial tenants play an important role in evaluating the revenue potential of mixed-use properties. As a result, the value of two different buildings in the same area may differ simply because of the composition of their tenants.