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 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 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.|
Here are the different types of mixed use loans and some helpful details:
Government Backed Loans
Mixed-use loans supported by the government include SBA 7a, SBA 504, and USDA rural development business loans. Such kind of mixed use development financing is permanent, and its terms range from 10 to 30 years. Their interest rates start at 3. Additionally, SBA 504 loans can be used to fund construction and renovation projects.
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%. 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. Such short-term loans are paid at interest rates between 4% and 12%, and their terms can be anywhere from half a year to 6 years. 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
To prepare a mixed use building prior to refinancing 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
If you want to refinance to a permanent loan at the close of the term