A two-story building in Bishop Arts with a coffee shop and a boutique on the ground floor and apartments upstairs earns two kinds of income on two kinds of leases. A mixed-use loan has to underwrite both, and the ground-floor leases usually decide how much the building can borrow.
In short: LendingStreet finances investor-owned mixed-use buildings in Dallas, such as retail or office below with apartments above, for purchases, refinances and bridge loans up to $5M+. We underwrite on blended NOI from the commercial and residential space, and the commercial share of income, the length of the commercial leases and the vacancy assumptions all affect sizing. Acquisitions go up to 75% LTV, with max leverage set by program, property type and balance.
Dallas has two kinds of mixed-use stock. The first is older storefront buildings on traditional retail streets: Bishop Arts and the Jefferson Boulevard area in Oak Cliff, Elm Street and Main Street in Deep Ellum, Lower Greenville Avenue and the Knox-Henderson strip. Many have restaurants, bars or shops on the ground floor and a few apartments or offices upstairs.
The second is newer podium-style buildings in Uptown, the Design District, Trinity Groves in West Dallas and along the DART rail lines, where ground-floor retail sits under several floors of apartments. Most of those are large institutional assets. Our small-balance program fits the first group well, and selected smaller newer buildings.
We underwrite the commercial and residential income separately, then combine them. Each side gets its own vacancy assumption and its own expense treatment, because a restaurant lease and an apartment lease behave differently.
The commercial share matters. A building where apartments produce most of the income looks more like a small multifamily loan. A building where the ground-floor tenants produce most of the income is underwritten more like retail, with closer attention to lease terms, tenant quality and what it would cost to re-lease a vacant space.
| Underwriting item | Ground-floor commercial | Upstairs residential |
|---|---|---|
| Lease length | Often multi-year, with options | Usually 12 months |
| Vacancy assumption | Higher, since spaces take longer to re-lease | Lower, based on market and history |
| Expense recovery | Depends on gross, modified gross or NNN terms | Generally paid by the owner |
| Re-leasing cost | Tenant improvements and downtime | Turn costs and short downtime |
| What we read | Signed leases, rent history and tenant financials where available | Rent roll and trailing operating statements |
This example is illustrative and not a quote. An investor buys a two-story building near Bishop Arts for $1,850,000. Two ground-floor retail spaces lease for $4,200 a month each, and six upstairs apartments lease for $1,650 a month each. Commercial rent is $100,800 a year and residential rent is $118,800, so the commercial share is about 46% of gross income.
Underwriting applies 10% vacancy to the retail and 5% to the apartments, for effective gross income of $203,580. Expenses are $73,679: taxes of $31,000, insurance of $13,500, common utilities of $6,500, management of $10,179, repairs of $9,000 and reserves of $3,500. NOI is $129,901.
At 65% LTV the loan is $1,202,500, estimated annual debt service is about $101,988 and DSCR is about 1.27x. If one retail space sat empty for a full year, NOI would drop to about $84,541 and DSCR to about 0.83x. That is why lease terms on the ground floor matter so much.
| Item | Base case | One retail space vacant |
|---|---|---|
| Effective gross income | $203,580 | $158,220 |
| Operating expenses | $73,679 | $73,679 |
| Net operating income | $129,901 | $84,541 |
| Loan amount (65% LTV) | $1,202,500 | $1,202,500 |
| Estimated annual debt service | $101,988 | $101,988 |
| DSCR | 1.27x | 0.83x |
The Dallas Development Code includes mixed-use districts, MU-1, MU-2 and MU-3, and much of the city is also governed by planned development (PD) districts with their own rules. Oak Lawn, for example, falls largely under PD 193. Many older storefront buildings in Deep Ellum, Oak Cliff and East Dallas also sit in commercial or PD zoning written decades after they were built.
Before you buy, confirm that the current uses, including the upstairs apartments, are legal under the zoning and that each ground-floor tenant has a certificate of occupancy. A restaurant or bar use can also bring parking requirements that limit what can replace it. Zoning and use issues show up in the valuation and can change the loan.
A mixed-use building that is leased and cash-flow positive can be financed with a permanent loan on purchase or refinance. If you own it already and the income has grown, a cash-out refinance can return equity, sized on stabilized NOI.
If the building has a vacant storefront, a dated upstairs, or a tenant mix you plan to change, a commercial bridge loan can fund the acquisition and repositioning, with an exit to a permanent loan once the new leases are signed and the income is in place.
Mixed-use buildings carry a bit of every expense. Property taxes are set through the Dallas Central Appraisal District, and the owner can protest the appraised value each year. Insurance has to cover both commercial and residential exposure, and restaurant tenants can raise the premium. Hail is a statewide issue and North Texas sees plenty of it.
Mixed-use buildings take longer to value than a plain apartment building. Texas is a non-disclosure state, so comparable sale prices are not public, and true storefront comparables are few in any one neighborhood. The appraiser will lean on income, which makes clean leases and operating statements important.
Plan for a full commercial valuation, lease review, and environmental and property-condition reviews. Older buildings in Deep Ellum and Oak Cliff may have had dry cleaners, print shops or auto uses at some time, which can add environmental work.
A complete file shortens the process. Gather these before you request a quote.
Our investor loans are business-purpose loans on non-owner-occupied property, so every space should be leased to third parties. Send the address, price, rent roll and leases, and we will build the blended NOI, test DSCR with and without a ground-floor vacancy and come back with options. Get a quote with the form below or call (877) 298-1001.
A building with both commercial space, such as retail or office, and residential units. Live-work buildings can also qualify, as long as every unit is leased to third parties.
The more of the income that comes from commercial tenants, the more the loan is underwritten like retail or office, with higher vacancy assumptions and closer review of lease terms and tenant quality.
Possibly. Bar and restaurant tenants are reviewed case by case for lease term, rent history and insurance cost. The building must be cash-flow positive with realistic vacancy assumptions.
Up to 75% LTV on acquisitions, with max leverage depending on program, property type and balance. The DSCR on blended NOI often sets the final amount.
Yes. The uses in the building need to be legal under Dallas zoning, including any MU or PD district rules, and commercial tenants should have certificates of occupancy.
Yes. A commercial bridge loan can fund the acquisition and repositioning, with an exit to a permanent loan or a sale once the new leases are in place.
No. Our investor loans are business-purpose loans on non-owner-occupied property, so no unit can be occupied by the owner.
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