Financing/ development options for small scale mixed use property

Atlanta, Georgia
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Financing/ development options for small scale mixed use property

Tia Williams
Member since 2025 · 2 posts · 2 votes

Hi,

My husband and I own single family home on a 1.14 acre lot as our primary residence. On it, we want to develop a small scale mix use project where we’d turn our current home into a community education space and office space (housed in the basement that is unfinished) and build 1-2 units on the back of the lot for our family to live in and 1 unit to rent out. We’ve already took the concept to our local zoning and city council who have been supportive of the idea. We also have a prospective tenant in place to start lease in 6 months.

I have some experience as a LO specializing in traditional residential mortgages but project is more complex. Any recommendations on how to phase and finance such a project with minimal capital and fair credit?

Here’s an overshot of the numbers

Current property value : $290k-$300k
Owed: $246k
Future lease: $2500/ month with out basement office, $3500/ month with basement office

Renovation/construction estimate
-$70k for basement + landscaping
-$200-$250k for 1 residential unit

Our current mortgage is $1949 (can be $1600 once pmi is off) with a rate of 4.85%— we have homestead exemption . If I could keep this forever, I would —but idk how likely that is lol

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  • Elijah RodriguezPro Member
    Investor · Waxahachie, TX · Member since 2025 · 6 posts · 3 votes
    4d

    Id underwrite the project to the best of my ability, then present the idea to a few lenders. Ive always heard its best to let them present their options instead of going in with a specific loan product in mind.

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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    3d

    Hey Tia,

    This scenario seems very tight based on the current mtg owed and property value. What is the ARV and the total cost of the project? Finding a lender that will be comfortable doing an owner-occupied commercial development may take a bit of digging locally.

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    3d

    Tia, this is an interesting project, especially because you’re trying to turn an existing primary residence into a combination of personal space, business/education space, and rental property.

    From the financing side, I’d probably phase the project around the pieces that either create income or unlock the next phase, rather than trying to fund everything at once. But I’d also make sure you’re modeling the tax side before deciding how to structure the financing.

    One thing I’d be very careful about is keeping the different uses of the property clearly separated. Your personal residence, the community/office space, and the rental unit can have very different tax treatment. The construction costs, improvements, mortgage interest, and ongoing expenses should be tracked by use from the beginning.

    I’d also confirm how the current homestead exemption and mortgage terms are affected by the planned changes before assuming the current numbers will remain the same. With $290K–$300K of current value and roughly $246K owed, there isn't a huge amount of existing equity to work with, so I'd want the project to be very disciplined about which improvements create value or income and which are simply nice to have.

    I'd model the project in phases and look at the financing, projected rental income, construction costs, depreciation, and eventual exit together rather than treating the financing decision separately from the tax strategy.

    Feel free to DM me, I’d be happy to send over a few resources that might be helpful.

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