A two-story building on Washington Avenue or 19th Street with shops below and apartments above earns two kinds of income. Underwriting treats each one differently, and the mix decides how much the building can borrow.
In short: LendingStreet makes mixed-use loans in Houston for investors buying, refinancing or repositioning buildings that combine commercial space with apartments. We underwrite on blended NOI, applying separate vacancy assumptions to the commercial and residential income, with custom terms up to $5M+ and up to 75% LTV on purchases. The commercial share, lease lengths and tenant quality all affect sizing.
Most investor mixed-use property in Houston sits along older commercial streets inside or near the Loop. Washington Avenue, the 19th Street and White Oak areas of the Heights, Westheimer through Montrose, Main Street through Midtown, and EaDo east of downtown all have buildings with ground-floor retail or office and apartments or lofts above.
Outside the Loop, newer mixed-use projects tend to be larger planned developments. For investors, the typical file is a smaller building with a handful of storefronts and several units, or a live-work building where tenants rent space that combines both.
Each corridor has its own character. Washington Avenue has a mix of restaurants, bars and newer residential, while the Heights tends toward smaller neighborhood retail. Montrose has older converted buildings with small shops and offices, and EaDo has seen newer construction near the stadium and downtown.
Underwriting splits income into commercial and residential pieces. Apartment rent is usually treated as steadier, so it often carries a lower vacancy assumption. Storefront and office income depends on a few tenants and their lease terms, so it typically gets a higher vacancy assumption, and short or month-to-month leases get extra scrutiny.
The more of the building's income that comes from commercial tenants, the more the loan looks like a commercial retail or office loan. A building that earns most of its income from apartments is sized more like a multifamily property.
| Factor | Residential share | Commercial share |
|---|---|---|
| Typical vacancy view | Lower, based on unit turnover | Higher, based on tenant count and rollover |
| Documents reviewed | Rent roll, unit leases | Full leases, estoppels where available |
| Key risk | Rent levels versus nearby units | Lease expiration and re-leasing time |
| Expense notes | Utilities, turnover, repairs | Who pays taxes, insurance and CAM |
This example is illustrative and not a quote. An investor buys a Heights-area building for $1,900,000 with three ground-floor retail suites leased for $84,000 a year and six apartments at $1,550 a month, or $111,600 a year.
Underwriting assumes 10% vacancy on the retail income and 5% on the apartments, giving $75,600 plus $106,020, or $181,620 of effective income. Assumed operating expenses are $36,000, so NOI is $145,620. At 70% LTV the loan is $1,330,000 with estimated annual debt service of about $117,943 on a 25-year amortization. DSCR is about 1.23x.
| Item | Amount |
|---|---|
| Retail income after 10% vacancy assumption | $75,600 |
| Apartment income after 5% vacancy assumption | $106,020 |
| Effective income | $181,620 |
| Operating expenses (assumption) | -$36,000 |
| NOI | $145,620 |
| Loan at 70% LTV | $1,330,000 |
| Estimated annual debt service | $117,943 |
| DSCR | About 1.23x |
A stabilized mixed-use building with signed leases and steady apartment rent can go straight to a longer-term commercial loan. A building with vacant storefronts, below-market rents or units that need work is often a better fit for a short-term bridge loan, then a refinance once income is in place.
For an owner who already holds a stabilized building, a cash-out refinance can pull equity out for the next deal, as long as the new payment is still covered by NOI.
Houston's lack of zoning does not mean anything goes. Many neighborhoods, including parts of the Heights and Montrose, have deed restrictions, and the city has historic districts with their own review for exterior changes. Parking requirements and setbacks also affect what a building can be used for.
If the current use depends on a variance, a grandfathered condition or a recent change of use, flag it early. The appraiser and underwriter will want to see that the use is legal.
Many older mixed-use buildings sit close to bayous or in low-lying blocks. Flood zone status, prior claims and ground-floor elevation affect both insurance cost and how the commercial space can be used after a major renovation.
Property taxes come from the Harris Central Appraisal District value and the local taxing units. Texas is a non-disclosure state, so your purchase price is not public, but expect the appraisal district to revisit the value. Owners can protest each year.
Mixed-use loans take longer than a loan on a rental house. Expect a full appraisal, lease and rent roll review, an environmental report and a property-condition review. Retail tenants who sign estoppel letters confirming their lease terms can speed up the review.
Plan ahead for retail tenant turnover too. If a storefront lease is ending soon after closing, underwriting will look at how long similar space nearby takes to re-lease and what rent it commands. Showing that you have budgeted for leasing costs and downtime helps the file.
A clean package helps the team size both income streams.
Our investor loans are business-purpose loans on non-owner-occupied property. We do not finance a storefront that your own business will occupy.
Use the form below or call (877) 298-1001 with the address, rent roll and target loan. The team will underwrite the blended NOI and come back with custom terms.
A building that combines commercial space, such as retail or office, with apartments or live-work units. Buildings that are fully residential with one to eight units go through our residential programs.
Yes. Commercial income usually carries a higher vacancy assumption than apartment income, so a building with more commercial income often supports a smaller loan for the same gross rent.
Often through a bridge loan first. Once the space is leased and income is steady, a permanent commercial loan can replace it.
Up to 75% LTV on acquisitions, with custom terms up to $5M+. The DSCR test on blended NOI often sets the final amount.
Yes. Deed restrictions can limit commercial use, and underwriting checks that the building's current use is allowed.
Yes, if the building is stabilized and cash-flow positive. The new payment has to be covered by NOI.
No. These loans are for investors leasing space to third-party tenants.
Usually several weeks, because of the appraisal, lease review, environmental report and property-condition review. Complete leases and a rent roll up front help.
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