Mixed-Use
A property combining residential and commercial uses, such as retail on the ground floor with apartments above.
Definition
Mixed-use properties combine two or more types of use in a single building, most commonly retail or office space on the ground floor with residential units above. These properties can offer income diversification across different tenant types and lease structures. Commercial tenants often sign longer leases and may be responsible for their own buildout and maintenance costs (NNN leases). However, mixed-use properties can be more complex to manage and finance. Lenders may classify them differently depending on the ratio of residential to commercial space. Investors are attracted to mixed-use for the potential for higher overall returns and built-in diversification.
How This Relates to DSCR Loans
Some DSCR lenders finance mixed-use properties if the residential component is the primary use (typically 51% or more of the space). Pricing adjustments usually apply.
Related Terms
Multifamily
Residential properties with multiple units, ranging from duplexes to large apartment complexes.
NOI (Net Operating Income)
A property's total income minus operating expenses, before debt service and taxes.
Cap Rate
The ratio of a property's net operating income to its market value, used to estimate return potential.
Cash Flow
The net money remaining after all income is collected and all expenses and debt payments are made.
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