Mixed Use Property - General Questions

[Andrew T.]

Curious if anyone has had experience with mixed use properties in Philly as a landlord.

Eyeing a 2-4 unit, 1 of the units is a dentist office, the others are rented out to tenants. The deal would leave me inheriting tenants with a couple years on their lease leftover, that's an entirely different discussion. My questions are as follows - 

1. How does tax work on mixed use property? Will I be looking to pay residential or commercial taxes or a mix of both?

2. Similar question, but what kind of insurance is required on such property?

3. The use of one unit as a dentist office is legal, but how difficult is it to convert to a residential unit? I am clueless when it comes to zoning laws.

Thanks in advance

[Troy Sheets]

Originally posted by @Andrew T.:

Curious if anyone has had experience with mixed use properties in Philly as a landlord.

Eyeing a 2-4 unit, 1 of the units is a dentist office, the others are rented out to tenants. The deal would leave me inheriting tenants with a couple years on their lease leftover, that's an entirely different discussion. My questions are as follows - 

1. How does tax work on mixed use property? Will I be looking to pay residential or commercial taxes or a mix of both?

2. Similar question, but what kind of insurance is required on such property?

3. The use of one unit as a dentist office is legal, but how difficult is it to convert to a residential unit? I am clueless when it comes to zoning laws.

Thanks in advance

 I've rehabbed several mixed-use properties along commercial corridors in Philadelphia and know the zoning pretty well. Most likely you have CMX2 or CMX2.5 zoning, which is Commercial Mixed-use (CMX) by right, which means you're actually required to have ground floor commercial across the entire frontage of the building and for the first 30' of depth, then can have residential in the rear (beyond the 30' depth) and on the floors above. Insurance isn't anything crazy but I don't know off hand how much more it is, but you're insuring the building, not the business. Call an agent and get a quote, don't guess at it or take the word of some moron like me off the interwebs :) Taxes are easy enough to look up and you're paying taxes on the land and building, I don't believe there are commercial or residential taxes, just property taxes period, but I could be wrong...so look them up online or call the city. 

You could also have RM1 (Residential Multifamily) zoning with a variance to use a portion of the building as commercial. If that's the case, it's very easy to switch to all residential as it's by right. The number of units is determined by lot square footage so it'll depend on how big the lot is. Shoot me a PM with the address and I can take a look and tell you what your options are.