A Texas mixed-use building earns money two ways: storefront leases on the ground floor and apartments or offices above. Lenders size the loan on both, but they do not treat the two income streams the same, and Texas taxes and insurance shape what is left.
In short: LendingStreet makes mixed-use loans on Texas investment buildings that combine commercial and residential income, with custom terms up to $5M+ and up to 75% LTV on acquisitions. The loan is underwritten on the property's NOI, DSCR and LTV, so the commercial share, lease terms and vacancy assumptions all affect sizing. Our investor loans are business-purpose loans on non-owner-occupied property, made to LLCs and other entities.
For this program, mixed-use means an investment building with both commercial space (retail, restaurant, office or service tenants) and residential units, usually stacked, sometimes side by side. Classic examples are a two-story downtown building with shops below and apartments above, or a newer vertical project with ground-floor retail.
Small buildings with 1 to 8 residential units and no meaningful commercial income are residential loans, not commercial. For those, see our Texas 5-8 unit DSCR page or the metro DSCR pages. Mixed-use files land here because the commercial income changes how the building is valued and underwritten.
In the large metros, mixed-use stock clusters in walkable, older districts and in newer infill corridors. In Dallas, investors look at Deep Ellum, Bishop Arts and Uptown. In Fort Worth, the Near Southside and Magnolia Avenue. In Houston, Montrose, the Heights and EaDo. In Austin, East Austin and South Congress. In San Antonio, the Pearl and Southtown areas.
Outside the big five, many Texas towns have historic downtown squares with two-story brick buildings that fit the mixed-use pattern. Markets such as Waco, Lubbock, El Paso, McAllen, Corpus Christi and College Station each have their own tenant base, and the size of the local renter and retail market matters more to underwriting than the city name.
| Market type | Typical mixed-use stock | What underwriting looks at closely |
|---|---|---|
| Big-five metro core districts | Older retail-over-apartment buildings, newer vertical infill | Retail lease terms, restaurant tenant mix, parking |
| Metro suburbs | Newer town-center buildings | Commercial vacancy, tenant credit, HOA or association rules |
| Smaller Texas cities | Historic downtown two-story buildings | Depth of the local tenant pool, building condition, deferred maintenance |
| Gulf Coast markets | Mixed-use near ports and downtowns | Windstorm and flood insurance cost |
Residential rents are usually steadier and easier to support with market data. Commercial rents depend on individual leases: the tenant, the remaining term, who pays expenses, and how long the space has historically sat empty between tenants.
Because of that, expect a higher vacancy and credit-loss assumption on the commercial share than on the apartments. A building that is mostly residential with one small storefront tends to size more like an apartment loan. A building where most of the income comes from retail leases tends to size more like a retail loan, and short remaining lease terms can reduce leverage.
This example is illustrative and not a quote. All rents, expenses and values are assumptions for a hypothetical two-story Texas building with three ground-floor retail bays and six apartments above, bought for $1,600,000.
Retail rent of $8,500 a month totals $102,000 a year, and the six apartments at $1,350 a month total $97,200. Applying an assumed 10% vacancy to the retail income and 5% to the apartments gives effective gross income of $184,140. Operating expenses are assumed at $72,000 (property taxes $34,000, insurance $16,000, and repairs, management and other costs $22,000), leaving NOI of $112,140.
A loan of $1,040,000 is 65% LTV. With estimated annual debt service of about $88,206, the DSCR is about 1.27x. If the retail vacancy assumption rose or taxes reset higher after the sale, the loan amount would come down to keep the ratio in range.
| Line | Amount |
|---|---|
| Purchase price | $1,600,000 |
| Retail and apartment gross rent | $199,200 |
| Effective gross income after vacancy | $184,140 |
| Operating expenses | $72,000 |
| NOI | $112,140 |
| Loan amount (65% LTV) | $1,040,000 |
| Estimated annual debt service | $88,206 |
| DSCR | 1.27x |
Texas has no state income tax, and local governments lean heavily on property taxes. The county appraisal district sets the appraised value, and local taxing units such as the city, county, school district and special districts set the rates. On a mixed-use building, taxes are often the largest single expense.
Owners can protest the appraised value every year. The deadline is generally May 15 or 30 days after the appraisal notice, whichever is later; confirm with your appraisal district. Underwriting usually budgets taxes on the expected value after the purchase, not the seller's bill, because a sale often leads to a higher appraisal.
Texas is a non-disclosure state, so sale prices are not public record. Appraisers rely on their own data, market surveys and information shared by market participants, and mixed-use comps are already scarce because every building has a different blend of retail and residential space.
That makes the valuation step slower and sometimes more conservative. A full commercial appraisal is required. You can help by sharing your own purchase contract, any recent sales you know of, and the income history the appraiser needs to use an income approach.
Hail and wind affect insurance costs across the state, and older buildings with flat or aging roofs can be expensive to insure. On the Gulf Coast, including the Houston area and Corpus Christi, windstorm and flood coverage can add a large line to the budget, and some coastal properties need separate windstorm policies.
Get an insurance quote early, before you finalize your offer. A quote that comes in well above your pro forma can change the loan amount more than a small change in rent.
Commercial loans take longer than residential loans. A mixed-use file typically needs a full appraisal, a rent roll, copies of every commercial lease, operating history and often environmental and property-condition reviews. Older downtown buildings may also raise questions about code compliance and deferred maintenance.
Yes, subject to underwriting. In smaller markets, we look closely at the depth of the local tenant pool and how long storefronts have historically stayed leased.
Up to 75% LTV on acquisitions, with custom terms up to $5M+. Actual leverage depends on NOI, DSCR, the commercial share of income and lease terms.
If there is real commercial income, it can be underwritten as mixed-use. If it is essentially 1 to 8 apartments with a token storefront, it may fit a residential DSCR loan instead.
Storefronts can take longer to re-lease and depend on individual tenants. Underwriting reflects that risk with a higher vacancy and credit-loss allowance on commercial income.
Usually not. A sale often leads to a higher appraised value, so budget taxes on the expected post-purchase value and plan to protest each year if the value looks high.
Yes. Commercial and mixed-use loans need a full valuation, and in a non-disclosure state like Texas that step can take more time.
Most mixed-use borrowers use an LLC or other entity, which is standard. Recourse varies by program, and some programs ask the principal to sign for the loan personally.
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