Multifamily & Mixed-Use Financing

The Owner-Occupancy Rule

SBA loans (both 504 and 7(a)) require the borrower's operating business to occupy 51%+ of the property (60% for new construction with plans to occupy 80% within 10 years). For a mixed-use building — say, ground-floor retail under apartments — this means the retail space being occupied by the borrower's operating business must be at least 51% of the total square footage. Most urban mixed-use buildings flip this ratio (apartments are 80%+ of SF), which makes them ineligible.

When Mixed-Use Works

Mixed-use SBA deals do exist. The most common: a commercial operator (medical practice, restaurant, professional services firm) buys a 2-3 story building, occupies the ground floor commercially (51%+), and rents the upper-floor apartments as supplementary income. The 504 program loves these deals because the commercial business supports the debt service and the apartments are gravy.

Hotel-Adjacent Multifamily (SRO)

Single Room Occupancy (SRO) and extended-stay properties classified as hospitality are SBA-eligible. The line between "hotel" and "long-term residential" matters: properties marketed as hospitality (30-day or shorter stays, daily/weekly rates, hotel services) qualify. Properties marketed as rental apartments do not.

When You Need a Non-SBA Solution

For pure-investment multifamily, look at conventional Fannie/Freddie multifamily programs, DSCR loans, or jumbo investor loans. See our SBA 504 vs Jumbo loan comparison for the trade-offs.