While a core tenet of defining DSCR Loans is that the collateral is residential properties only, one of the core tenets of real estate in general is that there are always “exceptions.” Any real estate investor with some deals under their belt likely understands this completely: every deal is different and there are exceptions, workarounds and “in this cases” all the time. It’s one of the things that separate real estate from other areas of finance; in the “real” world, in contrast to numbers on a screen, things are not always 100% to the decimal and a perfectly defined math equation!
DSCR Loans are obviously no exception, even when it comes to one of the core features: residential real estate usage. While DSCR Loans for “Mixed Use” properties, or properties that aren’t strictly made up of residential units, are a very small sliver of the total DSCR Loan market (likely less than 1% of all DSCR Loans) and in 2025 are only offered by a small minority of DSCR Lenders, they are a thing and do exist as an option for real estate investors. Another core tenet of real estate investing is that the “riches are in the niches,” which describes the common phenomenon of real estate success when investors pick a small focus area – even if it’s a tiny slice of the market – and ride that expertise and pinpoint focus to great wealth.
As such, even though investing in small Mixed-Use properties isn’t nearly as common as single family rentals or multifamily, it’s definitely worth considering and understanding the financing options available, including Mixed Use DSCR Loans. While Mixed Use DSCR Loans are a small portion of the industry right now, as DSCR Loans continue to become more and more popular, and loans build up a track record of performance, the trends of expanding the product will likely continue, it’s a good bet more lenders will offer DSCR Loans on mixed use properties in the future.
For lenders that offer DSCR Loans on Mixed Use properties, the qualification, pricing and structure will generally be equivalent to Multifamily (5 -10 unit) DSCR Loans programs, i.e. the experience requirements, key metric (LTV, DSCR, FICO) minimums and maximums and loan structure options will look the same. To clarify (as this often surprises people), the DSCR Ratio is still calculated as Rents / PITIA, and all other expenses for Mixed Use DSCR Loans. This means that typical commercial expenses such as security or CAM are not included for Mixed Use DSCR Loans. Generally, all the differences for Multifamily DSCR Loans versus Traditional (1-4 Unit) DSCR Loans apply to Mixed Use DSCR Loans.
Mixed Use properties that are eligible for DSCR Loans have similar loan and property value ranges as multifamily, generally eligible only for a narrow unit range of two to eight total units and in the $500,000 to $2,500,000 property value range. Bigger properties, whether they have more units or higher values, are comfortably in the boxes of larger commercial real estate lenders and banks and aren’t a fit for Mixed Use DSCR Loans. Additionally, these “mixed use” properties must be majority residential in nature, and the commercial units restricted to fairly basic uses, like small offices or shops, generally no industrial or extensive workshop setups allowed.
Q: What is a Mixed Use DSCR Loan?
A: A Mixed Use DSCR Loan is a DSCR Loan for a property that has a mix of residential units and commercial units. While offered by a minority of DSCR Lenders (who typically only lend on fully residential properties only), Mixed Use DSCR Loans are sometimes an option for financing properties that have between 2 and 8 total units, and are majority residential in nature by unit count, square footage and rents. The commercial units are typically limited to retail, office or restaurants and the properties are generally urban properties with a ground floor commercial space and a few apartment units stacked on top.
While the eligibility of a property with commercial units and usage is a clear exception and seemingly contradictory to the core definition of DSCR Loans; the rules and restrictions for a mixed use property to qualify as eligible for a DSCR Loan are extensive, and eligible mixed use properties must be overwhelmingly residential in nature to qualify.
There are three aspects of a mixed use property that must be majority or primarily residential for the property to qualify, and all three of these tests must be passed for it to be eligible.
The three mixed use residential requirements typically include:
1) Unit Count: i.e. at least half the units by count must be residential. Lenders will typically have a maximum of eight units for mixed use properties and provide an additional restrictive breakdown regarding unit splits past just a 50/50 test, such as a maximum of one commercial unit for 2-3 unit properties, a maximum of two commercial units for 4-5 unit properties and a maximum of three commercial units for 6-8 unit properties)
2) Square Footage: In addition to unit size by count, greater than 50% of the property’s rentable square footage must be residential as well. It’s important to note that this is in addition to the unit requirements and properties that may have a majority of units as residential apartments (like 2 out of 3), but if the commercial unit is larger by square footage than the two residential units combined, the mixed use property will be ineligible.
3) Rental Income: The property’s rental revenue in total must also have greater than 50% of rents coming from residential units. Typically, there is no vacancy allowed for DSCR Loans on mixed use properties (even on acquisitions), so this exercise will be applied to the actual in-place rents generated by the property. And to fully emphasize that these requirements all must apply, this means even if the property has more than half of its units residential, and they cover more than 50% of the square footage, but more than half the rental revenue dollars come from the commercial tenant, the property would likely be ineligible for a Mixed Use DSCR Loan.
Taken together, it’s clear that any mixed use property that passes all three aspects of this Mixed Use DSCR Loan residential nature eligibility test – majority residential by unit, square footage and rents – is an overwhelmingly residential property that can be underwritten and qualified for a DSCR Loan alongside fully residential properties.
Q: Can I use a DSCR Loan for commercial properties like office or retail buildings?
A: No, DSCR Loans are strictly for residential investment properties and are not meant for commercial real estate lenders. This confusion often stems from the fact that both DSCR Loans and Commercial Real Estate Loans use the “DSCR Ratio” calculation for qualifying loans, but “DSCR Loans” are a separate loan product (and even the DSCR ratio is calculated much differently). There may be rare exceptions of DSCR Loans offered on mixed use properties, however these properties must be small and overwhelmingly residential in nature.
Up Next: Cross-Collateralized or Blanket DSCR Loans (DSCR Loans for Portfolios)
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