8th August 2024

Guide to investing in mixed-use property

Investing in property, regardless of type, size or location, is an exciting and rewarding process – especially when you make the most of the more unique opportunities available to you. While many investors will look towards traditional property types to turn a profit, including buildings suitable for tenancy or those in disrepair which can be renovated and resold, those who want to diversify their portfolio should also consider the benefits of investing in a mixed-use property. 

Appealing to a range of buyers, from landlords looking to secure a more niche corner of the lettings market, to entrepreneurs in need of a space which meets their personal and business needs, mixed-use properties should not be overlooked. Worth the additional effort of tackling the property-specific challenges that come with buying mixed-use buildings, join us as our experts break down the main considerations you should be aware of for this type of investment, from Stamp Duty Land Tax (SDLT) differences to the mortgaging options that are available for financing your purchase.

What is a mixed-use property?

As the name suggests, a ‘mixed-use’ property is one which serves multiple purposes. When most people think of this type of property, they imagine the traditional building layout of a ground-floor shop with a first-floor flat. While this is correct, and is the most common type you’ll see, other properties which are also considered as mixed-use include working farms with agricultural land, large apartment buildings which have floors dedicated to office spaces and buildings which serve as dental or doctors’ surgeries with an attached dwelling.

For tax purposes, the official definition laid out by HMRC is a property which has ‘both residential and non-residential elements’, with ‘non-residential’ property including buildings and land that meet the following criteria:

• Commercial property (including retail units, hospitality spaces, and offices)
• Property which isn’t suitable for habitation
• Forests 
• Agricultural land (whether working farm land or land which serves other agricultural purposes)
• Any land or property which is not a part of a residential dwelling’s garden or grounds
• Six or more residential properties bought in a single transaction.

Due to the wide definition given to mixed-use properties, it’s no surprise that developers pay particular attention to these lots when they become available at auction and on the open market. At SDL Property Auctions, we’ve come across plenty of sought-after mixed use buildings, including city-centre apartment blocks with bottom-floor retail spaces, smallholdings in rural areas, and many more, which have sparked interest. 

If you’re looking to buy your own property, browse through our range of mixed-use properties for sale to find something that suits your requirements. Our catalogue is updated regularly with new lots too, so if there’s nothing in our current auction which appeals to you, you can check back regularly to find our latest properties. To make sure you’re investing carefully, we’ve also detailed our top advice for buying mixed-use buildings below.

Guide to buying a mixed-use property

Purchasing a mixed-use property isn’t always as straightforward as finding, bidding and buying a lot you like. As with any investment property, there are additional challenges you need to pay attention to, all of which should be considered before you buy. These include finding the right property to invest in, selecting the right financing option, and calculating your Stamp Duty Land Tax. 

What to look for in a mixed-use development property

First things first, when you’re searching for the right property, you should have a pre-prepared idea of what your must-haves and nice-to-haves are. This applies to every property search, but for mixed-use properties in particular you’ll need to pay attention not just to the needs of yourself (including being close to your property for ease of management and looking in an area within your budget), but if your investment plan is to find tenants to rent out your property to, you should also consider their needs. 

Common questions you should ask yourself to make sure your property appeals to your potential tenants include:

• Are the residential and non-residential elements fit for purpose?
• If the non-residential space is commercial, does the property get adequate footfall?
• For smallholdings, is the land in good condition for agriculture usage?
• Does the property have any access issues or limited parking which could impact footfall?

What financing options are available on a mixed-use property?

Similar to buying a commercial or buy-to-let property, traditional residential mortgages aren’t available for those purchasing a mixed-use property. However, that doesn’t mean you need to be a cash buyer, as there are still mixed-use-specific financing options available to you as an investor. Many lenders will instead offer a ‘semi-commercial’ mortgage which covers this type of loan. 

Do you pay stamp duty on mixed-use property?

Yes, you have to pay stamp duty on any mixed-use properties which are purchased for equal to or more than £150,000. The SDLT rates for mixed-use properties sold above this boundary are as follows:

• 2% on properties sold between £150,000 and £250,000
• 5% on properties sold for anything above £250,000

While the minimum boundary of £150,000 is lower than that of residential properties when considering SDLT, as residential taxation begins at £250,000, mixed-use properties have a maximum SDLT rate of 5%, while residential lots have a maximum of 12%. This means that, if you’re investing in a more expensive property, you could save on tax payments when choosing mixed-use over residential.

Invest in mixed-use property with SDL Property Auctions

Mixed-use property, whether its farmland with a residential dwelling, combined apartment and retail complexes, or a two-story building with a commercial unit and residential floor, represents an appealing investment opportunity to those who know where to look. They’re capable of generating better, more secure long-term income for landlords, and with a more diverse market to appeal to, finding tenants can also be an easier process.

To begin your search, browse through our current catalogue of mixed-use properties, or learn more about the benefits and procedures of buying by auction by reading through our Advice Hub guides.