Mixed Use Rental Properties

Things to know when purchasing mixed-use rental properties...


  • 25% minimum down payment.
  • Commercial space + residential apartments.
  • Limited lenders available.
  • Higher risk for lenders.
  • Slightly higher rates.

If you need a mortgage for a mixed-use property...

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Mixed use rental properties are properties that have both residential apartments and a component classified for commercial use. These types of properties are difficult to get mortgages for because many lenders do not want them in their portfolio of properties. It is possible to get a mortgage for these properties with as little as 25% down payment though.

Lenders, when underwriting a mortgage application, look at one thing. If the borrower doesn't pay, can we sell the property in a timely manner and get our investment back. When you step back and take a look at it from their perspective it really does make a lot of sense. With mixed-use properties the risks increase for the lenders. Let's say, for example, that the lender had to foreclose during a recession. During a recession there are less people that are looking to rent business space and more people looking to rent residential space. Therefore, it is tougher for them to recover their initial investment.

That's not to say that this is always the case, but that is why most main-stream lenders are not interested in mortgaging a mixed-use rental property. Let me reiterate that... MOST main-stream lenders aren't interested in these types of properties, but there are some. So don't get all worried, give me a call and we can discuss your particular scenario. That said, we may have to go to an alternative lender -- and that's not the end of the world!

Alternate lender, higher risk means slightly higher rate

Many times clients come to me and talk to me about a mixed-use rental property that they want to buy and how amazing the deal is. Then they hear that for this type of property they would have to deal with an alternative lender and the rate will be slightly higher than fully discounted residential rates and all of a sudden they are thinking of walking away from the deal.

Don't look at it like a home owner. A good deal is a good deal

If you have an opportunity to buy a mix-use rental property and there really is a great potential for profits, then that won't change based on the lender that needs to be used. A home owner looks at a rate and says "I want the lowest rate because if I save $1 on my mortgage that is money in my pocket". When you are looking at mixed-use rental properties, this is not the case. This is because every $1 spend might only be $0.65 out of your pocket (or something like that). Remember that your interest is a tax deduction which means you have more money in your pocket at tax.

This is obviously over-simplified but the point is, don't look at your purchase as a home owner. A mixed-use rental property is a business venture and as with any business venture, you should be looking at the bottom line, not your emotions! Does the deal make financial sense or no? Can I get a bigger profit elsewhere or no? It is that simple.

25% Down payment required

When purchase mixed-use rental properties it is going to be required to put down a minimum of 25%. I say minimum because it will depend on the actual property and what the commercial portion is being used for. Typically lenders will look at store front, office space or something similar for mixed-use properties. However, they will not lend on properties with say an auto mechanic shop in it.

Jim Thornton is the right choice

Working with clients to help them acheive there goals is what I do best. I will help you find deals that meet your needs and provide great value. As with any mortgage, but especially when you are looking at mixed-use rental properties outside main stream lenders, there are things to consider that are way more important than rate!

Let me help you arrange your next mortgage. Call today toll free at 1-866-257-0158.