Mixed use zoning

[Rob Chamberlain]

Hello everyone, 

I am interested in advice on a mixed use property that I am looking at where there is a restaurant on the 1st floor and apartments on the 2nd and 3rd levels. Originally the two upper levels were office space that were converted an unknown number of years ago. It is zoned as a commercial property in the state of Wisconsin and I want to ensure that this isn't an issue that could cause problems should I pursue acquiring the property. 

Thank you for your help!

Rob

[Jeff G.]

@Rob Chamberlain

 Any building with more than 4 units in it is already "commercial." I don't own any commercial properties, but I've looked at some and given the whole idea some thought.

• The first question is: what is the restaurant paying for rent? How long is their lease? And, is the property still attractive to you if they leave? People have to live, but they don't have to eat out. If the building won't cash-flow without the commercial tenant forget it.
• If you're in a mixed use building, unless you're in an extremely densely populated urban metropolis, these apartments are going to be less attractive to renters or have lower tenant quality.
• Make sure the place has adequate parking. I've seen MANY of these so called "deals" on Loop Net with space for some shoppers / restaurant goers. But.... no place for the apartment dwelling tenants to park. It's just my two cents, but if you can't answer the parking question don't buy the place.
• When you run your numbers be sure to account for taxes.
• If you've never done a real estate transaction before, don't' start with commercial. 

That's all I can think of at the top of my head.