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Mixed Use Property Loans

We're still closing mixed use property loans.  This sector is still viable.

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Owners considering mixed use property loans have excellent commercial real estate loan options as this is one of the favorite building types by lenders/banks.  From the lenders perspective a combination of multi family and either retail or office space is preferred as apartments are considered the most stable of all commercial building types. Buildings without a multi family component are still liked, due to the tenant and income diversification.

Mixed Use Mortgage Lender  

Below is a break down on the underwriting components of a typical loan from a refinance perspective.

Mixed Use Property Loan - LTV

Loan to value restrictions on mixed use property loans are normally capped at 80% on a rate and term refinance and 80%  loan to value on cash out refinances.  Higher LTV’s are available, but depend largely on strong DSCR.  Borrower should expect increased rates and fees for higher LTV’s .   Slightly lower loan to value requirements should be expected for properties that do not have a multifamily component.   

DSCR

Debt Service Coverage Ratio restrictions are typically set at a relatively aggressive 1:1.15 for this mixed use property loans.  Meaning that for every $1.15 of net income (income after taxes, insurance, repairs etc) the property produces, the mortgage payment can not exceed $1.00.  Said in another way, after all expenses and the mortgage has been paid, the owner will need to net $.15 to qualify for the refinance.

Exceptions can made with this rule on mixed use refinances.  For example, stated income loans can be an outstanding option for owners that have low debt coverage ratios due to either overstated expenses, current high levels of vacancy, or understated income, etc.

Tenant Evaluation

Tenant evaluation is not as important within the mixed use property category as others (like single tenant NNN properties) but is still relevant. Lenders scrutinize the time left on the current leases and other information. 

Property Analysis

Market value and market rent is important and will be evaluated and compared to the subject property.  Age, appearance, location, accessibility, and local market conditions, as well as other factors are considered. 

Credit Worthiness

The personal credit worthiness of the borrower will be evaluated.  680 credit score is normally the minimum for the best finance options.  Exceptions can be made on this as some mixed use mortgage lenders will consider scores as low as 600.  The overall strength of the property, tenants, net worth, DSCR, and LTV can offset concerns of low credit scores.

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