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When investing in real estate it can be easy to find yourself in a box. Whether you are investing in single-family housing, retail, or other single-use properties, the properties that most people are investing into are relatively limited – but that is not the case for every property.
Mixed-use real estate is one of the most customizable and versatile forms of real estate available. This makes it a hot ticket item for investors who want to build stable, reliable portfolios that are better protected from financial hardships and economic crisis.
So, what are the benefits of mixed-use real estate and why is it a good option for real estate investors? Let’s take a look.
But, before we get caught up in the world of mixed-use real estate, I want to offer you a free strategy call with my team at LendCity. These properties are some of the best commercial investments you can make, but they take creative financing in order to be successful. So, if you would like to get started the right way, click the link below for a free strategy call today.
What is Mixed-Use Real Estate
Mixed-use properties are essentially pieces of real estate that combines multiple forms of real estate into a single property. This allows investors to take advantage of diverse types of real estate within a single investment property.
Types of Mixed-Use Real Estate
While mixed-use real estate can come in a near-limitless variety of forms, the majority of mixed-use properties come in one of four main categories.
One of the most common forms of mixed-use real estate is main street real estate. These properties are designed to combine residential units with commercial properties you would expect to see on main streets or downtown. This is usually accomplished by building residential units above the commercial space.
Similar to main street real estate, live/work real estate combines residential units with commercial or industrial property. However, the difference is that the residential units are intended for the employees of the commercial or industrial space. This can include businesses on the ground floor of the employee housing or offices with attached apartments for the business.
Office and Residential
Office and residential real estate create an environment where both offices and residential real estate are sharing a single building. In these properties you may find offices and businesses sitting side by side with apartments and multi-family units dispersed throughout the building.
Many hotels are actually mixed-use properties. This is because these hotels often house the hotel itself, as well as fitness centers, retail areas and gift shops, restaurants, and entertainment halls. These are popular amongst people looking to book weddings due to the accessibility of hotel rooms and hall rentals under one roof.
Discover How To Analyze a Properties Cash Flow With This Step By Step Guide
The Advantages of Mixed-Use Real Estate
Mixed-use real estate investing comes with a variety of advantages that make it an appealing option for investors looking to invest in commercial real estate. These advantages include:
Higher Rent Yield
On average, investing in mixed-use real estate allows you to charge more each month in rent. Typically, when moving into these properties, tenants are willing to pay up to 5 per cent more in rent each month to residential units compared to traditional multi-family or single-family units.
Depending on the tenants and the purpose of the commercial space, your tenants may further incentivize to pay higher rent costs. For example, if you offer apartments above a grocery store or a market, tenants may be more inclined to pay higher rent costs to avoid driving for their groceries.
Multiple Streams of Cash Flow
Much like multi-family residential real estate, mixed-use real estate offers the ability for you to rent a single property to multiple tenants. This can make it easier to cover the mortgage and expenses of the property as opposed to single-use properties where a single tenant is expected to cover all of the costs of maintaining the building while still earning you a satisfactory amount of cash flow.
Additionally, properties with multiple forms of cash flow are often considered safer investments because a single vacancy does not halt the entirety of the income being generated by the property. For example, in a main street mixed-use property, if your commercial tenant covers most of all of the mortgage with their rent payments, any residential tenants on the property can be treated as purely or primarily profit.
A diversified portfolio is a reliable portfolio. Typically, when you are investing it is highly recommended you invest in different types of properties so that downturns in particular portions of the market cannot sink your entire portfolio. This can be accomplished in a variety of ways by purchasing multiple different types of properties across multiple niches and demographics.
However, because mixed-use real estate combines multiple sectors of the market into one property, they are naturally diversified as a single investment. This means that if one portion of the market takes a hit, your property may go mostly unaffected if it also appeals to a different area of the market that is not impacted or better yet, experiences an increase.
Commercial Real Estate is Always in Demand
The real estate market is constantly in flux, and that means that the demand for any specific property can change at any given time. However, regardless of how the market shifts, commercial real estate remains popular. This is because of the constant demand for offices, storefronts, or other commercial units in order for businesses to operate their day-to-day functions. So, while the market may see a downturn, your tenants are unlikely to pack up and move and new tenants are still going to be on the hunt for places to set up shop.
Finance Your Next Mixed-Use Property
Every good real estate deal begins with a good mortgage. After all, you do not want to pay more than you have to each month on interest rates and unexpected fees. So, it is important that you work with a mortgage broker to find a lender who can give you the best mortgage product to suit you and your needs.
That is why LendCity works with a wide network of lenders, to ensure that you can be matched with the best mortgage product available to you. To apply today or if you have any questions, you can call LendCity at 519-960-0370 or visit us online at LendCity.ca. Alternatively, you can book a free strategy call with our team at the link below.