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Expert Answers to Biz Questions
Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.
Think Investing In Mixed Use Property Is Too Much Work? This Article Will Change Your Mind
Mixed-use property refers to buildings that are used for both commercial and residential purposes. For example, buildings with office space on the bottom floor and apartments on top are considered mixed-use. These types of buildings are common in major commercial strips in busy cities like Manhattan and Brooklyn. Other buildings have ground floor doctors’ offices with single-family homes on top.
In 2017, mixed-use developments were a substantial portion of the $1.6 trillion spent on construction. Developers are acting on consumer demand for walkable communities and efficient use of limited space. Consumers welcome this new trend because today’s lifestyle needs center on convenience. People don’t have time to travel to a shopping mall just to see a movie or visit a brand name store.
Smart investors are capitalizing on the growing need for convenience
According to National Real Estate Investor online, mixed-use property developments are on the rise. The goal is to “create destinations that draw residents, tenants, visitors and patrons to engage, interact, live, shop, work and play.” That’s exactly what consumers want, and many people relocate just to be close to that kind of community.
Thanks to the community aspect of these buildings, investing in mixed-use property carries a significant potential for ROI, even when markets are down.
Advantages to investing in mixed-use property include:
- Longer leases from businesses (less turnover)
- A business will likely be a good watchdog for the residential community
- Businesses don’t usually operate overnight (less noise/disturbance)
Some disadvantages are that financing mixed-use property can be difficult. However, the government offers low down payment options when a mixed-use property meets specific criteria. For instance, FHA offers financing for single family mixed-use properties and mixed-use properties with 2-4 units when a minimum of 51% of the building is residential.
Are you looking to invest in mixed-use property?
Before searching for mixed-use property to buy, there are a handful of factors to consider including:
Zoning. Can other investors convert nearby buildings into mixed-use properties? Can new mixed-use buildings be constructed? If so, those constructions would increase the density of the area, which will bring more business.
Diversification. One investment provides diversification. When your investment property is a mix of residential space and office space, you won’t suffer as much from a downturn in the local office space market. Income from your residential units can compensate.
Enhanced value. The right multi-use investment will increase in value. For instance, apartment buildings with a ground floor retail strip can generate rents in excess of 5% of what similar buildings without retail space rent for. The reason? The combined usage increases the synergy of the space. People want convenience and are willing to pay more for an apartment if they don’t need to drive to the grocery store or to see a movie.
Visit Assets America for a full description of 8 crucial considerations when searching for mixed-use property for sale.
Investing in multi-use property is a sound investment
Multi-use property is a smart move for any serious property investor. There are risks with any property investment, but the potential for ROI and sustained value can be significantly higher with multi-use property.
Today’s market is all about convenience. People are moving into downtown areas at a rapid rate to be walking distance from shopping, dining, and entertainment. Most of these downtown areas consist of multi-use property like giant bookstores with apartments on top, or business strips with apartments on either end.
Multi-use property probably isn’t the best investment for someone new to real estate, unless you don’t mind a sharp learning curve pertaining to commercial and residential investing. However, the potential for ROI will continue to increase alongside society’s need for convenience. When you find a good deal on mixed property, it’s wise to consider it. If you don’t buy it, another investor will.
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