Mixed-Use Property
What is a mixed-use property?
A building combining residential and commercial space — retail, restaurant, or office on the ground floor, apartments above.
A mixed-use property is a single building that contains both residential and commercial uses. The classic American example is a Main Street building: a storefront, restaurant, or office on the ground floor, with two to four apartments above. Urban infill projects often follow the same pattern at larger scale.
Mixed-use creates an income blend — the residential rents are typically more stable and tenant-friendly, while commercial rents are higher per square foot but more sensitive to local business conditions. From a lending perspective, the question is which side dominates: if commercial space is a small fraction of the building, the loan can be underwritten like a multi-unit residential rental. If commercial space dominates, it’s a commercial real estate transaction.
Conventional Fannie/Freddie loans don’t finance mixed-use; the project rules cap commercial at 25%, but even small commercial cuts the building out of the standard purchase eligible set. Non-QM DSCR lending fills this niche.
How mixed-use properties apply at Total Quality Lending
Total Quality Lending finances mixed-use under its Multi-Unit DSCR program:
- 2–8 total units per building (mixed-use)
- Commercial space ≤ 49.99% of total building area and total property income
- Eligible commercial uses: retail, restaurant, office only
- Commercial-unit caps by building size: max 1 commercial unit for 2–3 total units; max 2 for 4–5; max 3 for 6–8
- Vacant residential units qualify at 75% of market rent (must be actively marketed)
- Vacant commercial space does not contribute to qualifying income
The appraisal includes a rent roll, income & expense statement, and either a commercial BPO or second appraisal as a review product (in PA and NC, a commercial evaluation product is used). See Multi-Unit DSCR for full LTV and FICO grids.