Mixed-Use Financing in 2025: How Brokers Can Tackle Complex Deals
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Mixed-use properties blend multiple real estate uses into a single project — most often multifamily over ground-floor retail. For lenders and brokers, this makes financing more nuanced than a typical deal. Success hinges on evaluating each component individually, telling a cohesive story, and knowing which capital sources to approach.
Learn more in this guide, part of our larger series on financing any type of commercial real estate.
What Is Mixed-Use Real Estate?
Mixed-use real estate refers to a single development with two or more distinct property types — for example, residential units above a grocery store. These properties generate diversified income streams and are often celebrated for their urban planning appeal. But because different property types come with different risk profiles and lease structures, lenders must evaluate each income stream separately.
Common Mixed-Use Configurations
Multifamily Over Retail (Most Common)
A multifamily building with street-level retail, such as a pharmacy, café, or grocery store. This is the most widely accepted configuration among lenders.
Office Over Retail
A traditional downtown setup, often found in historic or redeveloped urban centers.
Multifamily + Office + Retail
The full “live-work-play” mix — often a high-rise or master-planned project with different uses on different floors or across different parcels.
Horizontal vs. Vertical
- Vertical: Multiple uses stacked within a single building.
- Horizontal: Separate buildings for each use within a larger development. These may be financed with separate loans — for example, an agency loan on the multifamily portion and a bank or debt fund loan on the commercial space.
Financing Mixed-Use: The “Weakest Link” Problem
Lenders typically underwrite the entire asset but assess risk based on the most vulnerable component. For example, if the office portion is vacant or outdated, it can reduce the overall loan proceeds, even if the multifamily portion is strong.
Broker Insight: Structure the deal to emphasize how the components complement each other — e.g., the apartments' foot traffic supports retail, or a grocery anchor boosts tenant retention.
Where to Find Capital for Mixed-Use Deals
Fannie Mae
Fannie Mae will finance mixed-use properties under a single loan, provided the commercial space:
- Does not exceed 35% of the net rentable area, and
- Contributes no more than 35% of the effective gross income (EGI).
They underwrite the entire property but apply more conservative assumptions to commercial income (e.g., higher vacancy and cap rates).
Freddie Mac
Freddie Mac offers similar mixed-use financing, with slightly tighter limits:
- Commercial space limited to 25% of net rentable area and EGI in many cases.
- The Small Balance Loan (SBL) program may allow commercial income up to 33% with exceptions.
HUD/FHA
HUD’s 221(d)(4) and 223(f) programs are far more restrictive. The default limits are:
- 10% of net rentable area and 15% of EGI for commercial use.
- In exceptional cases, up to 25% of net rentable area and 20% of EGI, but this requires significant justification.
Important: HUD will not fund projects where commercial components dominate or serve outside customers rather than residents.
Banks and Credit Unions
These lenders may offer more flexibility in underwriting commercial space but will typically require recourse, lower leverage, or more conservative assumptions.
Debt Funds and Specialty Lenders
For more complex or transitional mixed-use assets, non-bank lenders may be viable — particularly if the project doesn’t meet agency or HUD thresholds. They are also a key source for construction or phased development loans in horizontal mixed-use projects.
Component Risk
Each use type (e.g., office, retail) must stand on its own. A weak link — such as a vacant commercial unit — can jeopardize the deal.
Sponsor Experience
Lenders want to see that the sponsor has successfully developed or managed similar mixed-use projects.
Construction Phasing
In new builds, lenders often require that commercial space be pre-leased before financing the multifamily component.
Opportunities for Strong Mixed-Use Projects
Heavy Multifamily Component
If 70% to 75% or more of the project is multifamily by square footage and income, it may qualify for agency financing — though brokers must confirm with actual Fannie/Freddie thresholds.
Grocery or Credit Retail Anchors
Ground-floor grocery stores or national brands (e.g., CVS, Starbucks) provide stability that reassures lenders.
Condo Sell-Out Plans
In projects with for-sale residential units, a documented sales strategy and absorption projections can strengthen the capital stack.
Final Thoughts
Mixed-use deals are complex, but brokers who understand lender tolerances — and who can clearly narrate how each use supports the whole — are best positioned to succeed. Always verify agency and HUD eligibility with the latest program guides before structuring your deal.