How do you feel about mixed properties?

Question

Here's the question to pose to all you BP folks.  How do you feel about mixed properties?

A mixed property being a mix of a commercial and residential use in one property.  Hence the mixed term.  Most often you'll find the classic commercial space on the street or ground level and residential on the 2nd, 3rd, etc floors above.

One listing I looked at this type.  Below was a sandwich shop and a bar.  Above it was several apartment units.

Let's assume it's in your target area and the financials work for you.  Do you purchase it (at the right price) or avoid it and why?

Elizabeth Colegrove · Answer

I would totally do it if I saw the demand. Some areas that is another bubble waiting to callapse while other areas it is the perfect time to invest. With the current climate I think this is a great place to invest as long as it is in a productive thriving downtownsdowntowns

Mary B. · Answer

@Charles Press,

Co-signing with what Hattie Dizmond wrote, for sure. The business would have to be viable even if the apartments above needed an overhaul, that's alright with me. However, if the business on the ground floor isn't doing well; its more work then what I'd want to put up with now. It'd take more than just rehab and putting a tenant in there with a pm on the watch. If you found a good off-market mixed-used property I'd say go for it.  Even on the small side of it; If you get a store-front with two or 3 apartments over top. It's profit potential would better the average residential only triplex or quaplex.

Kudos,

Mary

Shane Pearlman · Answer

Hey @Charles  Press - that is a great question and I am hopefully about to embark on that exact adventure for the first time. Top level answer: if you know the market and like where it is heading + the numbers work, go for it.

I've spent today negotiating on a multi-use (2 retail at street level and a group of residential above). The location is solid and has a strong retail profile. It is one block from the biggest retail / restaurant / bar intersection in the area. The tenants have a great history and the building has a vacancy under 2% over the last 10 years.

As @Hattie Dizmond mentioned, at least in my market, there is significant demand right now for residential that is intermixed with good retail and jobs.

I personally would like to learn more about other asset classes and this seems like a calanced step into getting my hands into retail. My property manager has experience with retail & residential in this part of the city and is confident if his ability to manage the property and help me force equity (as we believe that there is some room to do so).

Hattie Dizmond · Answer

For me it would entirely depend on the demand for that type of property.  15 years ago in Dallas you would have had to pay people to live in that type of building.  Now, you can't find enough of that type of property in the urban & inner city/downtown regions.  If I found a property like that, where the numbers worked and in a location with the demand...heck yeah!!!