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What if you could invest in a property that offers the stability of residential rentals and the income potential of commercial real estate, all under one roof? We're excited to share how mixed-use properties, which combine different types of real estate like apartments over retail shops, offer a unique and powerful way to diversify your portfolio.
Managing different types of tenants might seem complex, but we're here to break down mixed-use investing into three simple steps to show you how this "best of both worlds" strategy can work for you.
Step 1: Find the Right Blend
The key to a successful mixed-use investment is finding a property with the right combination of residential and commercial space in a great location. You're looking for a property where both businesses and residents want to be. This usually means a walkable neighborhood with good foot traffic for the commercial tenants and desirable amenities for the residential tenants.
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Actionable Advice: We encourage you to focus on vibrant, "main street" style locations. Look for properties where the ground floor is suitable for a cafe, boutique, or small office, and the upper floors are ideal for apartments. A property that's already occupied with paying tenants can be a great way to start, as it provides immediate cash flow and demonstrates proven demand.
Step 2: Secure a Commercial Loan
Financing a mixed-use property is different from a standard residential loan, but it's absolutely manageable. Because the property generates income from commercial tenants, lenders will typically view it as a commercial investment. This means you'll likely need a commercial loan.
Actionable Advice: We recommend connecting with a mortgage broker who has experience in commercial lending. They can guide you through the process, which often involves a more detailed look at the property's income and expenses. Lenders will be very interested in the strength of your commercial leases, so having long-term, reliable tenants in place is a huge advantage.
Step 3: Master a Dual Management Role
Managing a mixed-use property means you'll be wearing two hats: one for your residential tenants and one for your commercial tenants. While residential leases are fairly standard, commercial leases can be more complex, often lasting for several years and involving details about property taxes, insurance, and maintenance.
Actionable Advice: We've found that clear communication and strong lease agreements are essential. Be prepared to handle different needs—your residential tenants might call about a leaky faucet, while your commercial tenants might have questions about signage. For investors who are new to this, partnering with a property management company that has experience in both residential and commercial properties can be a game-changing decision.
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Is Mixed-Use Investing for You?
We're optimistic that mixed-use properties can be an incredible addition to your portfolio. They offer multiple income streams, which help to spread out your risk. If one apartment is vacant, you still have rent coming in from your other units and your commercial tenant. This built-in diversification is what makes the strategy so resilient and exciting.
If you're ready to explore an investment that offers a dynamic blend of income and growth potential, we encourage you to take the next step and learn more about mixed-use properties.
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