6 Advantages to Mixed-Use Properties

By April 7, 2020Real Estate
mixed-use property

Changing Demographics and Changing Needs  

Every year the population in America’s most densely-packed cities continues to rise at a steady rate. People move into city centers in search of increased economic opportunities but often times at the cost of overcrowding. Making room for both businesses and people is a task akin to fitting a square peg in a round hole. Urban planners are tasked with making the whole thing work while investors and property owners seek the highest possible return on investment.

Mixed-use properties have seen a surge in popularity in recent years, and are a good solution to the problem of economic growth in highly populated areas. We’re going to look at both the societal and economic advantages to owning or developing a mixed-use property.  

What is a Mixed-Use Property?  

A mixed-use property combines the zoning requirements of both commercial and residential properties all in one. A mixed-use property is one with space specifically apportioned to both residential housing and commercial business space. Both types of zoning occur on the same property, often in different sections that are either adjacent to one another or vertically aligned with one another. For example, a mixed-use property may feature a restaurant, entertainment venue, or storefront with apartment space above.   

Other types of property zoning include:

  • Industrial
  • Agricultural
  • Historic
  • Rural
  • Aesthetic

What are the Advantages of Using Mixed-Use Properties?  

Mixed-use properties carry with them a set of culturally relevant and economic advantages. These factors often go hand-in-hand and influence one another.   

Stimulating growth in dense, urban regions  

Developing a mixed-use property is the perfect solution for real estate developers trying to maximize upon, and take full advantage of, the limited urban space available to them.  

It’s no secret that some of the most desirable real estate exists in heavily packed city centers. Real estate like this represents a significant economic investment. With Urban centers being so highly developed already, savvy investors and real estate professionals must search for ways to increase economic growth.  

Reduction of pollution and traffic  

Mixed-use properties also have a positive effect on the environment. This type of zoning more easily lends itself to foot traffic, neighborhood business, and a boost to the locally-driven economy. With all your amenities located adjacent to your home, the tangle of traffic is greatly reduced, as are hazardous carbon dioxide emissions due to a lower volume of vehicles requiring access.  

Convenience  

No discussion of mixed-use properties is complete without referencing convenience. The popularity of mixed-use property has gained steam on both ends of the age spectrum. Millennials and baby boomers alike find incredible value from the self-contained environment provided through mixed residential and commercial zoning. Mixed zones allow people with reduced or fixed incomes to stretch their dollars further by placing amenities in a close, accessible radius.   

Return on investment  

The advantages to a mixed-use property aren’t just social. Developers who build properties with both consumer and residential tenants in mind stand to increase the revenue that they receive from rent by a significant amount. Landlords are able to rent to businesses in many cases without the added consideration of rent control. This makes mixed-use properties more desirable because they represent a greater return on investment than single-use zoning does.  

Maximizing the local economy  

Keeping money circulating is central to any type of economy. If money and wealth are allowed to stagnate, that economy will fail. Tightly-knit communities that feature mixed-use properties encourage the local economy to flourish. Residents of mixed-use properties are more likely to spend their hard-earned dollars in local establishments adjacent to where they live than they are to travel outside of their communities. Business owners stand to profit greatly by investing in mixed-use buildings and thus tapping into strong local economies.  

Tax advantages  

Mixed-use properties also come with a significant tax advantage. Business owners are allowed to deduct depreciated assets to lower their tax burden. Commercial and residential properties depreciate at different rates. Commercial properties depreciate over a 39 year period, whereas residential properties only takes 27.5 years to fully depreciate. Under the correct criteria, a mixed-use property which features both commercial and residential sections is allowed to depreciate at the residential rate, adding a significant monetary incentive to wise investors.  

Consulting With Incentax  

Given the increasingly dense and populous nature of America’s urban centers, mixed-use properties just make good sense from a cultural, environmental, and economic point of view. There are numerous advantages that all point to levels of added value. Mixed-use properties expand the value of real estate in the areas of the country where the greatest concentration of wealth is centered. Incentax can help you discover additional avenues of tax advantage that come along with developing and owning mixed-use properties. Please contact us to schedule your tax consultation today.