Are Smaller Mixed-Use Deals Becoming More Attractive?

Question

In some markets, smaller mixed-use properties appear to be offering strong yield potential.

For those investing in commercial real estate, are you leaning toward:

• Pure multifamily
• Mixed-use assets
• Small commercial buildings

Would love to hear how others are underwriting deals right now.

Ryan Stomel · Answer

Been self-managing a mixed commercial portfolio in SoCal for over a decade, so I can speak to this from the operator side rather than the investor side.

Small mixed-use is genuinely interesting right now, but the underwriting headaches are real. The residential units get valued on rent multiples, the commercial space gets valued on NOI/cap rate, and most lenders blend them in ways that don't always work in your favor. You have to underwrite each component separately to really know what you're buying.

The lease structure on the commercial portion matters enormously. A retail ground floor on a gross lease that the owner has been loosely managing is very different from one with NNN or modified gross terms where expenses flow through. I've seen deals look great on paper until you dig into who's actually been paying for HVAC, common area, and roof.

If yields are looking strong in a market, I'd want to know why the commercial tenant(s) are staying — is it a sticky use (medical, service-based) or a discretionary tenant that could churn? That answer changes the risk profile completely.