What is Mixed-Use Real Estate?

Mixed-use real estate exists everywhere. As a matter of fact, you’ve probably been in many of these properties throughout your lifetime. So, what exactly are mixed-use properties?Mixed-use real estate consists of multi-purpose buildings that have multiple uses or components. For example, retail, hotel, office, recreational, residential, etc. Most of these properties are used for both commercial and residential use. They may even include cultural, institutional, and entertainment functions. In this case, each component of the property complements the others nicely and provides advantages to those who reside there. Image sourceTypically, with a mixed-use property, three or more land uses are adjoined to create a meaningful total component. It is common for these types of developments to generate long-term performance, greater income levels, and significant overall returns. Ultimately, as the area around the mixed-use property grows, so does the resale value.Different Types of Mixed-Use Real EstateMixed-use real estate buildings work great for people who don’t have a car or prefer to walk places. One example of a mixed-use building is a hotel building with restaurants, retail stores, and office spaces. Others include residential apartments with attached gyms, restaurants, offices, etc.Some of the most common mixed-use real estate properties include:

• Main Street - Dating all the way back to the Victorian era, Main Street properties are believed to be one of the first mixed-use models. Typically, these are two to five-story buildings that have retail or commercial buildings on the first floor, with residential units on the floors above. These are popular since they are located in the heart of most cities and provide residents with convenient access to outside amenities. 

• Live/Work - The typical live + work real estate model includes a residential unit in the same building as a small business or workplace. These days, small businesses are becoming more prevalent, and so are these real estate models. Being extremely convenient, this allows business owners or workers to live in the same building as their workplace. An example would be a hair salon with an apartment or living space on top. 

• Hotels - People staying in hotels love the convenience of restaurants or retail shops in the same building. Luckily, this mixed-use property model is becoming more popular and continues to attract new clients. These days, you can find retail shops, offices, gyms, and restaurants in hotel buildings. 

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• Retail - Similar to hotels, retail spaces are also implementing the mixed-use real estate model. Since the Covid-19 pandemic, some people have converted to doing their shopping online. Because of this, retail buildings are being turned into mixed-use properties with residential units. Like hotels, parts of retail buildings like shopping malls can be converted into office spaces, gyms, or restaurants as well. 

• Office/Residential - Becoming even more prevalent due to the pandemic, office + residential buildings are convenient for those who strictly work from home. In these buildings, a person who lives on the top floor can simply walk down to their office space. 

Is Mixed-Use Real Estate a Good Investment?With the mixed-use investment trend becoming more popular these days due to convenience and eco-friendliness, it may be something to consider as a real estate investor. For the typical traditional residential landlord, it may seem a bit intimidating. However, these types of properties can allow you to charge more for rent. Along with that, these properties are more likely to attract a wide variety of people, there could be less risk than with a single property, and the turnover rate is much lower. Overall, it seems as though a mixed-use real estate model may be a great investment for someone who is looking to keep long-term tenants and secure higher rental profit margins. What Are the Benefits of Mixed-Use Real Estate?Mixed-use properties come in many different varieties and are used for various businesses and residential spaces. Luckily, successfully securing these buildings can be viable for any real estate investor. Not only that, but they come with an abundance of benefits and advantages. Let’s take a look at some of the most significant benefits of owning one of these unique properties. 

• Mixed-use properties are likely to attract many different types of people who want to live closer to restaurants, shopping malls, and work opportunities. 

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• You may be able to get a deal on purchasing repurposed spaces that are no longer used, which is great for investors and the environment. 
• Overall, you are able to charge more for rent in mixed-use properties. On average, commercial rates are between six and twelve percent of the original purchase price.
• The greater diversity of mixed-use spaces provide less risk for investors than a single-purpose property. 

What Are the Disadvantages of Mixed-Use Real Estate?Although the benefits may outweigh the disadvantages of owning mixed-use real estate, they should still be considered and thought about thoroughly before diving into a purchase. Mixed-use real estate investors may run into these various disadvantages:

• It may be more difficult to secure financing for commercial + residential buildings.
• If the building’s commercial tenants are having a hard time keeping customers, overall profits could suffer greatly.
• Noises of foot traffic, city bustle, and use of commercial spaces may cause residential tenants to complain or possibly drive them to move out if it interferes with their peace and quiet. 

How to Successfully Own Mixed-Use Real EstateSuccessfully owning mixed-use real estate is a viable option for any investor, and could be a great opportunity to branch out in your investments. However, there are some things that investors must keep in mind. Before making the decision to invest in mixed-use properties, don’t forget about real estate due diligence. This will help you decide if the property is worth investing in or not. It’s also vital to understand the current local market to make sure you’re making a sound investment. Image sourceInvestors must consider things such as financial expense reports, leases for current tenants, taxes and tax bills, building inspections, land surveys, services and repairs, zoning documents, all necessary local permits or important documents, and records of pending or current litigations. Luckily, rental investment managers in the area can help you with things like finding tenants, collecting payments, and handling maintenance requests.Once you’ve considered these aspects, you may be ready to make your investment. Keep in mind that purchasing the property is the easy part, but the hard work that comes after is sure to pay off.