Mixed use properties have become increasingly popular thanks to preferences for a “one-stop-shop” style of living. Residents can enjoy the convenience of having their living space within the same structure as a variety of other businesses, such as shops, meeting spaces, and restaurants. A mixed use property can be a great investment to add to your portfolio, but it does come with a few considerations. Read our article about mixed use property investment for more information.
What Is a Mixed Use Property?
As the name suggests, mixed use properties are those that combine units of different purposes. Hotels are one of the most well-known examples of mixed-use properties, since they often incorporate their own restaurants and wellness hubs, like gyms and spas. Another example would be an apartment or condo complex with its own eateries and shared office spaces. Properties that incorporate mixed-use units within the same building are known as “vertical developments.”
But mixed use properties do not have to be within the same building. For example, the Main Street model is a well known blend of residences, restaurants, and retail spaces that occupy a block, not just one building. This is known as a “horizontal development.” The oldest Main Street layout typically has businesses on the ground floor and living spaces or apartments on the upper levels.
You can also have a mixed use property that includes both horizontal and vertical developments. These types of developments are referred to as “walkable.”
Is Mixed Use Property a Good Investment?
With the ability to work, live, eat, and play in one building or within walking distance, the concept of mixed use residential properties is especially up and coming. It all but eliminates the need for a car, which is very appealing to young professionals, especially in the city.
Since investors will be able to capitalize on several different types of real estate, mixed use properties have the potential to generate higher returns over a longer period of time than single use developments.
That being said, there are certain considerations when investing in mixed use property. Let’s take a look at some of the pros and cons of investing in this type of real estate:
Pros of Mixed Use Property Investment
Diversification: multi use properties allow you to diversify your investment over many different categories. This means they are inherently less risky than single use property investment, which relies solely on one source of return (tenants, for example).
Increased Property Values: mixed-use properties tend to attract a wider, more diverse population of tenants. The walkable nature of these communities also lends itself to a creative and bustling atmosphere that can have a positive impact on property values in the area. This means you may see a greater return on investment more quickly.
Sustainability: multi use properties allow access to resources in a smaller space, which means land, water, and other utilities will be conserved. The walkability aspect also eliminates the need for a motor vehicle for many residences, which is an important step in halting climate change.
Cons of Multi Use Property Investment
More Complicated to Manage: having multiple types of properties to manage can be complicated. Overseeing apartments is one thing, but adding in shops, restaurants, office spaces, and more can quickly become overwhelming. Each has unique needs, and you will need to be prepared to deal with a wide variety of property-specific issues.
Greater Up-Front Costs: mixed use properties tend to require a greater up front investment than single use properties. You will also be dependent upon attracting new clients and businesses in order to see a reasonable return on your investment. While mixed use properties are in demand, it will still take time to fill vacancies with the right mix of tenants and businesses.
Limited Financing: multi use properties can be less risky for investors, but this is not always true for lenders. Again, you will need to guarantee that you can fill your property with an adequate number of tenants and businesses; furthermore, you will need to show that you can maintain a certain level of occupancy in order for the investment to truly pay off.
Mixed Use Property Financing in Colorado
Pine Tree Financial Partners offers loans on a variety of investment properties within the state of Colorado. We loan on a case by case basis and take pride in closing quickly, with as little red tape as possible. We want to make your dream come true. If you are looking to invest in a mixed use property, rental property, new construction, or other project, contact our office to get started.