You own a building with shops downstairs and apartments upstairs, or a small strip of leased storefronts. It has gained value and paid down debt, and you want to put that equity to work.
In short: LendingStreet finances cash-out refinances on mixed-use and small commercial investment property on custom terms up to $5M+, with rates from 7.50%. The property must be cash flow positive: its net operating income has to cover the new loan payment, and a building that loses money will not qualify. The loan is sized on the appraised value and on the building's income, with commercial leases and residential rents reviewed separately. When a mixed-use building is mostly residential, some programs treat it differently than a mostly commercial one, and that varies by program.
This is the first test, and it is not negotiable. On a commercial or mixed-use cash-out, the building's net operating income must exceed the new debt service. Equity alone does not qualify a loan. A building worth $3M that barely breaks even will not support a large cash-out, no matter how much value it has gained.
Cash-out makes this test harder, because a bigger loan means a bigger payment. Before you request a number, check that the building's NOI, after vacancy and all operating expenses, comfortably covers the payment on the loan you want.
Two limits set the loan, and the smaller one wins. The value limit is a percentage of the appraised value, set by the program and the property. The income limit is the largest loan whose annual debt service the NOI can cover at the program's required coverage.
Commercial terms are custom, so the leverage and coverage requirements depend on the property type, the tenant mix, lease terms and your experience. The financing team will show you which limit binds on your building and by how much.
| Limit | What it measures | What usually improves it |
|---|---|---|
| Value | Loan as a share of appraised value | A well-supported appraisal, strong leases |
| Income | NOI compared to annual debt service | Higher occupancy, longer leases, controlled expenses |
| Lease quality | How secure the income is | Longer remaining terms, staggered expirations |
| Condition | Capital needs that may cut into NOI | Recent roof, mechanical and facade work |
Underwriters separate the rent roll into residential and commercial income because the two behave differently. Apartment leases are usually 12 months or month-to-month and re-lease fairly quickly. Retail and office leases often run several years, but a vacancy can take much longer to fill.
Each side gets its own vacancy assumption, and the commercial side gets a closer lease-by-lease review. The share of income and square footage that is commercial also helps decide which program fits the building.
| Item | Residential units | Commercial units |
|---|---|---|
| Typical lease length | 12 months or month-to-month | Often multi-year, sometimes with renewal options |
| Vacancy assumption | Based on local apartment demand | Often higher, reflects time to re-lease |
| Who pays expenses | Owner pays most | May be shared or reimbursed under the lease |
| What gets reviewed | Leases, rent roll, unit condition | Full leases, amendments, tenant history, estoppels when required |
A building with five apartments over one small storefront reads very differently from one with three retail bays and two apartments. When most of the space and income is residential, some programs underwrite the building closer to a residential rental or multifamily property. When the commercial share is large, it is underwritten on full commercial terms.
Where the line falls varies by program. Lenders may look at the commercial share of square footage, the commercial share of income, or both. If your building sits near a cutoff, ask the financing team to run it both ways, because the program choice can change leverage, coverage and documentation.
On a refinance, the leases are the income. Underwriters want to know how long each commercial tenant is committed, what happens at expiration and who pays which expenses. A lease that expires soon after closing can lead some programs to underwrite that space as vacant or to ask for a reserve.
Have clean, signed copies of every lease and amendment ready. Make sure the rent roll matches the leases and the bank deposits.
This example is illustrative and not a quote. An investor owns a mixed-use building with three retail units at $3,000 a month each and six apartments at $1,600 a month each. The current loan balance is $900,000. The building appraises at $2,000,000.
Commercial rent is $108,000 a year and residential rent is $115,200, for $223,200 in gross rent. Commercial income is about 48% of the total. Applying a 10% vacancy factor to the commercial side leaves $97,200, and a 5% factor on the residential side leaves $109,440, for effective income of $206,640. After $70,000 of operating expenses, NOI is $136,640.
Assume the program allows a 65% loan-to-value cash-out: the new loan is $1,300,000. At a sample 7.75% on a 25-year amortization, the payment is about $9,819 a month, or about $117,831 a year. NOI covers debt service about 1.16 times, so the building is cash flow positive after the new payment. After paying off the $900,000 loan and sample closing costs of $30,000, the investor receives about $370,000.
| Line | Commercial | Residential | Total |
|---|---|---|---|
| Gross annual rent | $108,000 | $115,200 | $223,200 |
| Vacancy factor | 10% | 5% | |
| Effective income | $97,200 | $109,440 | $206,640 |
| Operating expenses | $70,000 | ||
| Net operating income | $136,640 | ||
| Annual debt service on $1,300,000 | About $117,831 | ||
| Coverage | About 1.16x |
In the example, the value limit set the loan at $1,300,000 and the income comfortably covered it. Change one assumption and the answer changes. Suppose the program for this building required NOI to cover debt service 1.25 times. The most the building could pay in annual debt service would be $136,640 divided by 1.25, or $109,312, about $9,109 a month.
At the same sample rate and amortization, that payment supports a loan of about $1,206,000, roughly $94,000 less than the value limit allowed. The cash to the investor would drop by the same amount. On mixed-use and commercial buildings, the income limit binds often, which is why the coverage requirement matters as much as the appraisal.
The fastest ways to raise the income limit are real: lease vacant space, renew short leases, bring below-market rents up at renewal and trim expenses you can document.
The same principles apply to a small retail strip, a multi-tenant office building or a flex property. With no residential income to balance the rent roll, every lease carries more weight, and tenant concentration matters: a building with one tenant paying most of the rent is reviewed more cautiously than one with several tenants and staggered expirations.
Our programs are for investment property leased to tenants. If your own business occupies the space, ask the financing team before applying, since that is a different kind of loan.
Cash-out proceeds are for business purposes: a down payment on the next property, renovating units or storefronts, building reserves, or paying off other investment property debt. Improvements that raise rent can also strengthen the building's income for a future refinance.
If the building's coverage is tight, a rate-and-term refinance that replaces the current loan without taking cash out may be the better choice. It can lower risk, extend the term and keep the building comfortably cash flow positive.
Our financing team reviews the scenario and comes back with 2-3 options, including which limit sets the loan on your building.
Yes. The building's net operating income must cover the new loan payment. A property that does not cash flow after the new debt service will not qualify, regardless of its value.
Commercial and mixed-use rates start at 7.50%. Terms are custom and depend on the property, the leases, the leverage requested and your experience.
Commercial and mixed-use loans are available on custom terms up to $5M+, with a $150,000 minimum. The size is set by the smaller of the value limit and the income limit.
It depends on the program. When most of the space and income is residential, some programs underwrite it closer to a residential or multifamily property. Others treat any commercial space as mixed-use.
Some programs underwrite space with a near-term expiration as vacant or ask for a reserve. A signed renewal before you apply can help.
Seasoning requirements vary by program. Some allow a cash-out based on the current appraised value fairly soon after purchase, while others want a longer ownership history or use your cost basis for recent purchases.
Some programs require them, especially for larger commercial tenants. An estoppel confirms the lease terms and that there are no disputes.
Possibly, if the remaining income still keeps the building cash flow positive at the new payment. The vacant space will usually be underwritten with no income.
Yes. Cash-out proceeds can go toward business purposes such as your next investment property, renovations, reserves or paying off other investment property debt.
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