Basics of 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 as well as permanent with terms between 6 months and 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 any building that consists of no less than two units with different zoning may be good 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 that earns under 40% of its income from the commercial units, and it has at least five residential units, you may be considered for a multifamily 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
The government actually backs certain mixed-use loans, namely USDA rural development business loans, and SBA 7a and SBA 504. 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 usual loans that can be obtained from banks and lenders, online and physical alike. Interest rates for these loans range from 4% to 6%, with 15 to 30 years as the term. Mixed use buildings should also be in good shape before financing. However, the owner is not required to use the building with these loans.
There are different kinds of mixed use development financing – for example, hard money loans and other private money loans, commercial bridge loans, and more. The terms for these short-term loans range from 6 months to 6 years, and their interest rates begin at 4%, going all the way up to 12%. 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% cash buyers
To prepare a mixed use building prior to refinancing to a permanent loan
If you don’t qualify for a permanent mixed use loan because of personal requirements
Purchase and renovation of a mixed use building in compromised condition
When you refinance to a permanent loan as the term ends