Mixed Use

I wrote a couple of days ago about buying multi unit properties, but I didn't mention mixed use properties. Mixed use buildings are those that have both commercial and residential space. It is generally a storefront on street level with apartments above. This is the ideal scenario for someone who runs a business, wants to own their space and live close by. You really can't get any closer than upstairs! A mixed use building could also be a great investment, as commercial spaces sometimes have higher rent and longer leases. Also, there would be no rent control for the commercial space.

Because there is commercial space involved, your financing will be different. There will only be one loan for the entire building and it will be considered a commercial loan. With this type of loan there is a minimum down payment of 30% required.

A major benefit that comes with a mixed use building is with condo conversion. With a two unit residential building, if both units are owner occupied you must fulfill a one year occupancy period before you can bypass the condo lottery and apply for your condo conversion. With a two unit mixed use building (one commercial and one residential) you do not have to fulfill that one year occupancy requirement. You can apply for a condo conversion right away. Once the building goes through the process there will be a commercial condo and a residential condo.

The same benefit applies to a three unit building. The two residential units, provided they are both owner occupied, can fulfill their one year occupancy requirement (a residential building with three units would otherwise have a three year occupancy requirement) and then bypass the lottery to start the condo conversion process.

There are currently 16 mixed used buildings available all throughout San Francisco, ranging in price from $779,000 to $2,800,000. If you are considering a live/work scenario, looking for investments, or want to take advantage of the early condo conversion for a jump in value, this way be your way to go.