What is Mixed-Use Housing?: 4 Big Pros and Cons for Investors

Mixed-use housing has enormous profit potential for real estate investors. It can attract high-paying renters and diversify your income. Let’s break down what mixed-use development projects are and how you can benefit from them below.

Main Takeaways: A Mixed-Use Project Guide for Real Estate Investors in Baltimore and Beyond

• Mixed-use homes mix various property uses in one property or concentrated location (like a plaza). They combine residential uses, commercial uses, and sometimes even industrial purposes in one area.
• There are two kinds of mixed-use projects: vertical mixed-use projects and horizontal mixed-use projects. Vertical mixed-use homes hold various uses within one building from top-to-bottom. On the other hand, horizontal ones spread out uses across a cluster of buildings.
• Mixed-use housing allows investors to offer raised rental rates, access a much broader renter pool, diversify their investments, and fill vacancies faster.
• Mixed-use housing can take longer to develop, have more complex laws and regulations, require higher levels of maintenance, and be harder to get funding for. That’s where specialized real estate loans, like hard money loans, can be helpful.

Table of Contents

• What Is Mixed-Use Housing?
• The 2 Types of Multi-Use Spaces
• The Pros and Cons of Mixed-Use Development Projects

What Is Mixed-Use Housing?

Mixed-use development housing is a type of real estate that mixes various property uses in one property or place. For instance, all these uses could be synthesized together in one building, plaza, set of streets, or even a neighborhood.

Within that one, contained area, space is allotted for residential, commercial, and industrial purposes alike. Apartments, offices, retail, restaurants, or other recreational businesses can all operate together.

As Baltimore hard money lenders would put it, mixed-use housing holds widespread appeal because it’s a win-win for consumers and real estate investors alike.

Consumers can enjoy the ability to live various aspects of life in the same, accessible, walkable vicinity. On the other hand, investors can enjoy portfolio and income diversification, as well as access to a bigger pool of high-paying renters.

The 2 Types of Multi-Use Spaces

There are two main types of mixed-use projects, vertical projects and horizontal ones.

Vertical Projects

Vertical mixed-use buildings are just that—buildings with multiple purposes from top-to-bottom. The lower floors are oftentimes dedicated to commercial purposes, and the higher ones are for residential purposes. These can be a better fit for places with limited space, like cities.

Horizontal Projects

Horizontal mixed-use projects spread each use across various buildings close to each other. For example, a line of apartments, restaurants, and shops could be all scattered on the same plaza, or even physically connected together. These can work well in the suburbs, which offer more building room. Also, it can be easier to navigate regulations for horizontal mixed-use housing than vertical housing.

The Pros and Cons of Mixed-Use Development Projects

The Pros

First, let’s look at the benefits you can reap from mixed-use investments. They include:

Higher Demand = Higher Rents

Mixed-use housing is prime real estate for consumers because of its unparalleled convenience. In particular, 90% of Millennials and Gen-Z-ers are willing to pay more for walkable properties. Needless to say, the public has a sky-high demand for mixed-use residential spots. By tapping into this unfulfilled niche, you can offer more optimal rental rates.

Wider Renter Market

Because multiple sectors can use mixed-use projects, you don’t have to limit your income base to residential renters. Instead, you can lease out to virtually any commercial entity under the sun, from stores to restaurants, to offices, and more.

Easier to Fill Vacancies

Mixed-use homes’ versatility makes it exponentially easier to fill vacancies. After all, you can cater to multiple tenant sectors, combined, at once.

Diversified Income Streams

With mixed-use development projects, you can invest in multiple markets. This way, even if one sector fails, you still maintain a stable cash flow in another. For example, even if the restaurant industry is in a downturn and some move out, you can still fall back on steady apartment income.

The Cons

Every property has its downsides, and multi-use development projects are no exception. Here’s what to consider:

Complex Regulations to Navigate

Some local laws do not permit mixed-use projects, or at least require special permits for them. So, you would have to find a location where these properties are allowed.

Furthermore, you may need to work with local governments so that you meet zoning laws and other regulations. For example, you may have to keep certain parking, building height, and noise requirements in mind.

Need More Intensive Maintenance

Mixed-use housing can have more spaces to maintain than regular apartments, all with their own unique maintenance needs. For instance, you will need to maintain apartments, stores, offices, and other areas. As such, you may need to hire property managers to oversee your investment.

Require Intricate Planning

Since mixed-use housing has so many components and uses, it can take longer to plan and design than traditional housing.

Harder to Finance

Since mixed-use housing is inherently more complex than regular housing, it can make the lender appraisal process more challenging. As such, some lenders may be hesitant to get involved with these properties. Luckily, some lenders, such as hard money lenders, can fund them. You simply have to look a little more!

How to Get a Loan for a Mixed-Use Property in Baltimore and Elsewhere

You can get a loan for a mixed-use property from commercial real estate lenders, particularly hard money lenders.

Hard money loans are hyper-expedited, private real estate loans. Lenders can deliver funding to buy, build, or renovate mixed-use housing within days or weeks.

Most importantly, hard money loans can be tailored toward the borrower’s unique needs. With mixed-use projects, especially, your ability to customize your loan can make or break your project. After all, no mixed-use housing venture is the same. Even within one project, each property use could have its own special requirements. Few loans can address these demands like hard money loans can.

Even better, if you’re an experienced investor with sufficient collateral and good credit, you may be able to get a special deal. At Maryland Hard Money Lenders, we can offer such borrowers up to 100% financing—no down payment required. So, call us today to jumpstart your investment!