Mixed-Use and Commercial Bridge Loans: What Investors Should Know

Do bridge lenders finance mixed-use and commercial property?

It varies by lender and program. Some bridge lenders stay with residential investment property, and others finance mixed-use or commercial buildings. Ask any lender, in writing, which property types and uses a given program covers before you build your plan around it.

Axelrad Capital's Bridge Loans page doesn't list eligible property types. If you have a mixed-use or commercial deal, describe it on the application and Axelrad's team will tell you which program fits.

For the long-term side, Axelrad's Mixed-Use Loans page lists fixed terms of 5–10 years with 25–30 year amortizations and up to 80% LTV. Those are long-term terms, so that program is a takeout option rather than a bridge.

How is a mixed-use bridge underwritten differently?

The residential and commercial sides are analyzed separately:

• Residential units: rents, occupancy and turnover, much like a small multifamily property.
• Commercial space: lease length, tenant quality, who pays which expenses (lease structure), renewal options and how easy the space would be to re-lease.
• Mix: some long-term lenders care about the share of income or square footage that's commercial. A property that's mostly commercial may be treated as commercial for financing.

The two ratios still apply. LTC (loan-to-cost) is the loan divided by purchase price plus renovation budget. LTV (loan-to-value) is the loan divided by the property's value. On mixed-use, the value often depends on income, so the rent roll and leases carry real weight.

What's the usual exit on a mixed-use bridge?

A refinance into long-term mixed-use or commercial debt once the property is leased and stabilized, or a sale. The long-term loan that pays off the bridge is the takeout. Takeout lenders typically look at stabilized NOI (net operating income: rents minus operating expenses), lease terms and occupancy. Plan which program you'll refinance into, and its rules, before you close the bridge.

Income split table

The commercial share of rent is the retail and office rent divided by total rent, and the commercial share of square footage works the same way. Leave a space blank if the property does not have it, and use the template below for lease status, lease end dates and who pays expenses.

How should you budget for commercial space during the bridge?

Commercial space usually costs more, and takes longer, before it earns anything. Build three items into the bridge budget:

1. Base building work. Bring the space to a leasable shell: code-compliant restrooms, HVAC, electrical service and storefront.
2. Tenant improvements. Many commercial tenants expect the landlord to fund part of their build-out. Estimate an allowance based on local practice, and assume you pay it before rent starts.
3. Leasing costs and downtime. Broker commissions, free-rent periods and months of vacancy while the space is marketed.

Carry all three on the schedule as well as in the budget. A storefront that's leased in month nine instead of month five changes both the stabilized value and the bridge term you need.

Example: storefront with two apartments (hypothetical)

Example for illustration only. Not a quote or offer.

An investor buys a two-story building with a vacant storefront and two apartments upstairs, one of them rented. The plan: renovate the vacant apartment, build out the storefront to a basic standard, lease both and refinance. The bridge request covers the purchase and the work. Underwriting focuses on how long the storefront will take to lease, since that tenant drives much of the stabilized value. A realistic plan budgets several months of marketing for the storefront and doesn't count on a tenant's improvement allowance being paid back quickly.

Mixed-use bridge file checklist

What risks are specific to mixed-use bridges?

• Commercial lease-up takes longer than residential in many markets.
• Tenant improvements for commercial tenants can be expensive and paid upfront.
• Use changes can trigger code, parking or accessibility requirements.
• Takeout fit depends on the income mix. A property may qualify for one long-term program and not another.

Key takeaways

• Mixed-use bridges finance the period before a property's residential and commercial income both stabilize.
• Coverage of mixed-use and commercial property varies by lender and program. Confirm structure with the lender before you plan.
• Underwriting looks at the residential and commercial income separately.
• Commercial lease-up and tenant improvements usually drive the schedule and the budget.
• Plan the takeout (mixed-use or commercial) before you close the bridge.

Bring your mixed-use deal

Apply here and describe the property's mix, or start at the Bridge Loans page.