The Benefits And Drawbacks Of Owning A Mixed-Use Property

The Benefits And Drawbacks Of Owning A Mixed-Use Property

Expert Advice

If you're reading this article, then it's likely you're considering buying a mixed-used property or are at least interested in finding out more. 

 

As with any property type, there are benefits and drawbacks, which we will discuss in more detail.  Mixed-use properties are becoming more popular as people look to diversify what they buy and how it can be used.

 

Pros of mixed use investments:

  • Diversify your income streams and therefore potentially reduce investment risk so if one sector is underperforming, you still have another source of revenue
  • Often mixed-use properties are located in areas with high foot traffic, meaning greater exposure and an instant customer base for commercial premises which is attractive to prospective tenants
  • Smaller footprint as serving multiple purposes on the one piece of land

Cons of mixed use investments:

  • Poorly planned mixed use developments can create conflict between types of tenants, for example a loud mechanical business working below residential dwellings
  • Access to parking for the commercial premise may be restricted due to higher traffic and demand for parking in residential or suburban areas
  • Financing may be more challenging than a straight residential or commercial purchase as many lenders stick to primary markets (so you need to find specific lenders)

A deeper dive into some of these pros & cons:

Long term risks & being covered

 

As with any property purchase, you need to assess how other mixed use properties have increased or decreased in value over time.  Key factors to compare are land size, location, type of use and potential to add extra value. 

 

One thing to keep in mind is that a mixed-use property is going to be valued very differently to a residential purchase so even if part of the multi-use property can be lived in, you need to compare like for like.  If you're unsure, it's worth seeking out a financial advisor or property specialist.  

 

Getting mixed-use property insurance can be a good idea too, so that once you purchase you can put some protection in place for your investment. 

 

 

 

They Can Provide A Variety Of Different Housing Options

 

A double property has both a commercial and residential component. This type of building is located on one lot with two separate entrances allowing residents to come and go as they please without disturbing those working or shopping next to, or below them.

 

You can choose whether to live there yourself or rent out the residential part. If you decide to live there, then you no longer have to pay two sets of bills.

 

If you do decide to rent both sections, the plus is multiple revenue streams.  It also means that when either market has higher vacancy rates, you could still have some funds coming in.  So if there's an over supply of commercial properties, you could still have a tenant in the residential portion.  

 

The other benefit is that your tenant will likely enjoy the peace and quiet once the commercial portion closes for the day or over the weekend.  There are certain limitations as well and you need to consider how loud the commercial activities will be.  As you're unlikely to have a happy tenant and anything mechanical Monday-Friday.  Unless of course, the commercial tenant wants to live in the property.

 

As is the case with mixed-use properties there are lots of scenarios and you really need to map them out and then consider pros and cons. 

 

 

 

They Can Provide An Easy Transition

 

If you rent your own commercial premises, then you might be the perfect candidate for purchasing mixed-use properties as it removes any commute time.  It also means you're paying a mortgage (and ideally growing some equity) rather than rent on your own premises. 

 

Or it could provide the perfect opportunity to go after a long held dream or idea!

 

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In conclusion, when it comes to owning a mixed-use property there are some clear benefits along with drawbacks.  You need to figure out your end goal, do your market research to understand the risks and find a lender who will work with mixed-use property.