In the real estate industry, there are different types of properties. There’s residential real estate (single-family homes, duplexes and quadruplexes), commercial real estate (office buildings, industrial buildings, hotels, restaurants, shopping centers, etc.), agricultural/raw land, special use properties (churches, schools), and mixed-use properties (a combination of residential and commercial). Mixed-use properties are usually grouped with commercial properties because they’re quite larger than residential properties, though the residential portion may be larger than the commercial portion (e.g., apartment complexes). Another example of mixed-use properties is a business that has an apartment upstairs.
So, are these types of properties worth investing in?
They’re Easy to Find.
You may think that mixed-use properties are hard to find, but they’re actually pretty common— especially in larger cities. Los Angeles county has one of the hottest real estate markets in the country right now, with several different types of properties including mixed-use. Keep in mind that apartment complexes are considered mixed-use properties, though investing in one in Los Angeles or New York City will cost a significant amount more than in a city with a lower cost of living (though, with costs of living rising across America, chances are you’ll shell out a pretty penny for investments writ large).
You Have the Opportunity to Earn Multiple Income Streams.
When investing in mixed-use property, you’ll be renting to more than one tenant, which means you’ll be earning a lot more money. With commercial properties with residential units, you’ll be renting to the business owner and anyone living in the residential units— one of which may also be the business owner. You’ll earn even more with a mixed-use property such as an apartment building.
Mixed-Use Properties are Very Profitable.
Mixed-use properties tend to be located in high-traffic areas, meaning that business professionals looking for office space are likely to rent the space because more people will be aware of their business. Those seeking a place of residence— especially those who like to be in the center of all of the action— are likely to rent the residential units because everything will be within walking distance. Location is the most important thing to consider when investing in real estate, and mixed-use properties are almost always located in areas that see a lot of business.
Conflicts May Arise.
There may be some conflict between the tenants of the commercial portion of the property and the tenants of the residential portion. However, this typically only happens in poorly planned properties. With careful planning put into place, many mixed-use properties don’t run into this issue. Also, conflicts may arise because the tenants renting the property may not be familiar with how a mixed-use property is set up. If all of the tenants have the same understanding, then this will also decrease the potential for conflicts.
Financing for Mixed-Use Properties can be Difficult.
Many lenders tend to stick with the larger markets when it comes to financing, so it may be hard to come across financing in smaller real estate markets. Fortunately, there are lending companies that offer commercial property loans for mixed-use properties. It’s all about finding the right lender that’s willing to work with you to help you meet your goals as a real estate investor.
Overall, the pros outweigh the cons when it comes to investing in mixed-use real estate. They’re also a great addition to your real estate investment portfolio when you’re trying to diversify, and you’ll already be familiar with the rental process if you’re the owner of residential and/or commercial real estate. These types of properties aren’t as common as their residential and commercial counterparts, so it’s likely that you’ll be able to find a mixed-use property to invest in no matter where you live.