Understanding Mixed Use Development Financing
Mixed use development financing is designed for business owners and real estate investors who want to finance 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 can be short-term and at the same time permanent, terms going from 6 months to 30 years.
Mixed Use Development Financing – How It Operates
Mixed use loans are sets of various loans: short-term hard money, permanent construction, government-backed, and others. Almost all buildings that have a minimum of two uniquely zoned units can go into a mixed use loan. In a mixed use building, however, there is often at least a single commercial and a single residential unit that functions as a live/work space or as an investment.
If you own a property with no more than 40{b6e5e864465562d9a430a96bd49f2b8c33d674238c640ac1e47f87c38abd1fa1} 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
Business loans offered by the USDA, along with SBA 7a, SBA 504, are some examples of mixed-use loans that have government backing. These mixed use development financing options are fixed, with a term of 10 to 30 years. 25{b6e5e864465562d9a430a96bd49f2b8c33d674238c640ac1e47f87c38abd1fa1}, and you need to use no less than 51{b6e5e864465562d9a430a96bd49f2b8c33d674238c640ac1e47f87c38abd1fa1} of the mixed-use building. Construction and renovation financing is also possible with SBA 504 loans.
Commercial Loans Commercial mixed use loans are the typical loans provided by brick-and-mortar and online banks, and by other lenders. Such loans’ interest rates start at 4{b6e5e864465562d9a430a96bd49f2b8c33d674238c640ac1e47f87c38abd1fa1} and may go up to 6{b6e5e864465562d9a430a96bd49f2b8c33d674238c640ac1e47f87c38abd1fa1}, while terms can be anywhere from 15 to 30 years. One requirement is that mixed use buildings be in good condition before financing is possible. But occupancy of the building by the owner is not required.
Short-Term Loans
Mixed use development financing comes in several varieties and may include commercial bridge loans as well as private money loans, among many others. Such short-term loans are paid at interest rates between 4{b6e5e864465562d9a430a96bd49f2b8c33d674238c640ac1e47f87c38abd1fa1} and 12{b6e5e864465562d9a430a96bd49f2b8c33d674238c640ac1e47f87c38abd1fa1}, 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:
To compete with 100{b6e5e864465562d9a430a96bd49f2b8c33d674238c640ac1e47f87c38abd1fa1} 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