When it comes to real estate, understanding the distinction between commercial and residential properties is crucial. While residential real estate typically includes single-family homes, duplexes, and multi-family buildings with up to four units, properties with five or more residential units or one or more businesses are considered commercial.
Mixed-use properties, such as buildings with ground-floor retail and residential units above, can present unique challenges. These spaces are classified by the lender depending on the ratio of residential to commercial space. If the residential portion dominates, the property may qualify for more favorable residential loan terms, including lower interest rates that can compare to homebuyers.
Investment tips for mixed-use properties
Unique commercial storefronts like gas stations or nail salons can carry higher risks in the eyes of lenders. Higher perceived risk typically results in higher interest rates and larger down payment requirements. Lenders consider not just rental income but the overall viability of the deal including property taxes, maintenance fees, and other operating expenses.
EMS Commercial has more than 30 years of experience providing financing for multiple investment types, including residential, commercial multi-unit, and mixed-use properties.
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