Commercial Real Estate Property Spotlight: Mixed Use

hee hee....he said "Mixed Use"

Greetings from El Paso, TX.  I forget how hot it gets down here….WOW!  Perfect pool weather.

Today’s post is on mixed use properties.  I always liked the idea of mixed use because of the uniqueness as well as convenience.  In the “old” days, mixed use was common in downtown areas usually.  Having a “mom and pop” at the first level and residential apartments and or offices in the above levels.  Now….you will see mixed use in suburban areas.  Say….a Starbucks on the first level along with a host of restaurants and shops.  In the above levels, you have luxury condos, apartments and or offices. Currently, mixed use is in vogue in many areas of the country….but that was not always the case.  But I digress……

By the way, you can connect with me on Facebook @ www.facebook.com/robpowell as well as twitter at RobAPowell.

Anyway…….

This is the fifth post in a series that will highlight the different types of properties available to investors. The posts are an overview of general information. As with all investments, you should properly research the opportunities to determine whether they fit your portfolio.

What are mixed-use properties?
Mixed-use buildings are properties that offer more than one kind of use or type of tenant. This can include a building with space designated for retail and residential, office and retail, or any combination that includes two or more types of habitants.

What are the benefits to owning a mixed-use property?
Mixed-use properties can offer you a greater range of stability in that you can attract a wider variety of tenants. This means that if you have a residential/retail building, you can attract both residential and retail tenants. A single use property owner can only attract single-use tenants. Mixed-use properties may offer more stability in providing two types of income at a time when markets are fluctuating. This means that if apartment vacancies are up and supply outweighs demand, but office supply is down and demand is up, you will still generate income from the office portion of the property.

What are the drawbacks of owning a mixed-use property?
Owning two types of properties in one location means that you need to be on top of both types of markets. In addition to knowing both markets, you will need to understand the necessary marketing for both types of properties and understand how to market your integrated property. You need to be selective of your tenants to make sure that all uses are cohesive and income generating. For example, if you own a two story building with the bottom floor dedicated to restaurants and bars and the top floor dedicated to residential spaces, you will need to make sure your residential tenants are aware of potential noise, deliveries and other retail operational concerns. You will also need to make sure that the bar tenants are aware of the residential restrictions and are respectful to the tenants above.

With multiple types of uses in one property, you will also need multiple types of leases. It is important to do your homework to understand what types of leases are most effective for the types of tenants you will be leasing from. Be sure to comply with your state laws as well.

You may need to pay higher insurance premiums for owning a mixed-use property. With more uses, there can be greater risk. Be sure to shop around for the best coverage and rates.

Lastly, when looking at mixed-use opportunities, be sure to research a property’s past financials as well as market comparables. As with any investment, you want to generate cash flows, not headaches.

Until next time……rob

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