Understanding Mixed Use Development Financing
To fund mixed use buildings, business owners and real estate investors can rely on mixed use development financing. Financing-qualified mixed use buildings generally come with a number of units zoned for different purposes, like residential, business, institutional, etc. Mixed use loans may be simultaneously short-term and permanent with terms from 6 months to 30 years.
How Does Mixed Use Development Financing Work?
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. But usually, a mixed use building will have, at the very least, a commercial and a residential unit for a live/work space or investment.
If you’re the owner of a property that gets less than 40% of its income from the commercial spaces, and there are at least five residential units in it, a multifamily loan or apartment loan may be suitable for you.
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
The government actually backs certain mixed-use loans, namely USDA rural development business loans, and SBA 7a and SBA 504. This type of mixed use development financing is permanent and has 10 to 30-year terms. 75% and may reach up to 8. Construction and renovation financing is also possible with SBA 504 loans.
Commercial Loans Commercial mixed use loans are the usual loans that can be obtained from banks and lenders, online and physical alike. 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. 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 fall short of the personal permanent mixed use loan requirements
To buy and renovate a mixed use building in bad shape
If you want to refinance to a permanent loan at the close of the term