Chelsea, MA · Member since 2016 · 53 posts · 8 votes
Hello Everyone,
How do you purchase a building that's a commercial and residential. The building has several businesses on the bottom and apartments above it. All fully occupied. The only downside is the street parking.
I'm trying to figure out the steps I have to take to own a building like this.
Developer · Jacksonville Florida · Member since 2015 · 57 posts · 39 votes
5y
Mixed-use a great asset class. Offers great diversification in one property. I would go to local banks and credit unions for financing. You will need to find a bank that will hold the loan in their portfolio and sell it off.
Developer · Jacksonville Florida · Member since 2015 · 57 posts · 39 votes
5y
Mixed-use a great asset class. Offers great diversification in one property. I would go to local banks and credit unions for financing. You will need to find a bank that will hold the loan in their portfolio and sell it off.
Specialist · Lancaster, PA · Member since 2018 · 152 posts · 66 votes
5y
@Felix Torres The steps to purchasing a mixed use property have been accurately described by @Steve Mandelbaum. The only thing I would add is that even though these properties have residential units, they are still considered commercial. The fact that the property is fully occupied is on your side as far as financing is concerned. The bank may require a phase 1. Many of these properties are dated and could have been anything from a hotel to a gas station in times passed. Hence, it is important to find out what is under the ground prior to purchase...literally. In my area I am seeing these properties get converted to apartment buildings. But all in all I would say define your ideal use, check compatibility with zoning and get a phase 1.
Chelsea, MA · Member since 2016 · 53 posts · 8 votes
5y
Thank you @Steve Mandelbaum! I appreciate your response! I have a credit union down the street, I'm about to set up an appointment.
@Brett Peters Thank you for your response! This makes sense, the only thing that doesn't make sense is a phase one. Could you explain what a phase one is please?
Specialist · Lancaster, PA · Member since 2018 · 152 posts · 66 votes
5y
@Felix Torres A phase 1 is a "historical" environmental site assessment that is conducted to detect any potential or existing contamination issues within the earth based upon the past uses of the property. For example, say their was an abandoned oil tank or and underground gas line the phase 1 study will identify that. If their is nothing in the phase 1 to cause concern you are in good shape. If not, then you will have to proceed to a phase 2 and or a phase 3, which are more invasive and also expensive. But a phase 1 can save you a huge headache and out of pocket cost. You have to keep in mind that a "seller's disclosure" is not required by law in commercial real estate. It is legally buyer beware...if the seller chooses to disclose something like that it is their prerogative. Hence, it is common for lenders to require a phase 1 on certain commercial sites.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
5y
@Felix Torres I have a 5 unit mixed use building just as you described, and the recommendation to use a local bank / credit union for commercial financing is spot on.
Be sure to take into account for your cash flow analysis, the terms typically offered for commercial lending. Probably in the 4-5% interest rate range, 15 or 20 year term, 25-30% downpayment. Insurance will also be more, I'm paying $3k per year on my property. Note the shorter term range means you'll have higher payments but will build equity much quicker.