How to manage a mixed-use building with apartments and retail suites
Run the apartments and the retail suites as two different kinds of tenancy inside one building: residential leases follow tenant protection law and usually cover everything in one rent, while commercial leases are negotiated, often pass costs to the tenant, and are not covered by most of the residential rules. Keep one set of books for the building, but tag every dollar as residential or commercial so the rent roll, the expenses and the depreciation can be split correctly.
Why a mixed-use building is not just a big apartment building
A mixed-use building has at least two kinds of income under one roof, and almost every rule you rely on for apartments changes for the shops. Late fee caps, security deposit limits, notice periods and eviction steps in your state are written for homes. A retail suite is usually governed by the lease you and the business sign, plus your state's commercial landlord rules, which tend to be much lighter. Check your state's law for both, and ask a local attorney before you write your first commercial lease.
The money also behaves differently. Apartment rent is a flat monthly number. A shop may pay base rent plus a share of property tax, insurance and common area costs, a percentage of sales, or a rent that steps up each year. Leases for shops also run longer, often three to ten years, which makes a vacancy both rarer and more expensive.
What goes in each kind of lease
Keep the two lease types in separate templates so nobody pastes a residential clause into a shop lease or the reverse.
| Topic | Apartment lease | Retail suite lease |
|---|---|---|
| Term | Often 12 months, then month to month | Often several years, with options to renew |
| Rent | One flat amount | Base rent, plus a share of taxes, insurance and common costs, if you negotiate it |
| Deposit | Capped or regulated in many states | Usually a negotiated amount |
| Late fees | Capped or regulated in many states | Whatever the lease says, within state law |
| Use | Home only, with pet and guest rules | A named business use, hours, signs and what the shop may not sell |
| Insurance | Tenant insurance often optional or encouraged | Business liability insurance, with you named as an additional insured |
| Repairs | Landlord handles most of the unit | Often split: the tenant handles the inside of the suite, you handle the roof and structure |
The shop lease should also say who pays for shared items such as the building's electric meter for the hallway, water, trash pickup and snow removal, and how the shop's share is figured, for example by square feet.
How to keep the books for one building with two uses
Use one set of books for the building, and give every income and expense line a tag: residential, commercial or shared. Rent from each shop and each apartment gets its own income line in your chart of accounts so you can see at a glance which half of the building is carrying the other.
Shared costs need a rule you apply the same way every month. The common choices are by square footage (the shop takes up 1,800 of 10,000 square feet, so it carries 18%) or by number of units. Write the rule down once and use it all year.
Example a made-up building has 8 apartments and 2 shops. The roof costs $5,000 to repair, and the shops take up 25% of the floor area. Split by square feet, the shops carry $1,250 of the roof and the apartments carry $3,750. The two numbers add up to $5,000.
Recovery from tenants is a separate item. If a shop lease passes along its share of property tax, record what you bill the shop as income or as a reimbursement, depending on how your tax preparer wants it, and keep the tax bill itself as the expense.
Depreciation and taxes: 27.5 years versus 39 years
The IRS treats the two halves differently. Residential rental property is depreciated over 27.5 years, but only if 80% or more of the gross rental income comes from dwelling units. Nonresidential real property is depreciated over 39 years. A building that does not reach 80% from apartments is generally treated as nonresidential as a whole, so the share of income from shops can change the depreciation schedule for the entire building. The rules are in Publication 946 and Publication 527.
That makes the income split worth tracking every month, not once a year. Ask your tax preparer how they want the building set up, and keep the rent roll split by use so the 80% test is a number you can read off.
Maintenance across two kinds of tenants
A leaking apartment sink and a shop's broken door closer both arrive as work orders, but they are not the same job. The apartment repair may have a state deadline. The shop repair may be the tenant's responsibility under the lease. Mark each request with the unit and whether the lease puts the cost on you or the tenant, so the bill goes to the right place.
Building systems that serve both halves, such as the roof, the boiler and the fire alarm panel, are shared costs. Give them a shared tag and split them by your written rule.
How DoorKeeping handles it
DoorKeeping prices a mixed-use building by what is in it: $2 a month per residential unit and $10 a month per commercial suite, every feature included, no setup and no minimum. The building keeps one ledger, and each unit, residential or commercial, has its own lease, its own tenant and its own payments memo.
Example a made-up building with 8 apartments and 2 shops costs 8 x $2 = $16 plus 2 x $10 = $20, so $36 a month.
You can ask Claude or ChatGPT things like "what share of this building's rent came from the shops last quarter" or "which suite is behind on its share of the tax bill", and the answer comes from the building's own books. Rent and payments stay in your own bank accounts. DoorKeeping never holds your money and sends a payment only when you approve it. Tenants pay $0 by bank transfer or Zelle; a tenant who pays by card pays the card fee at cost, and cards are not offered in CT, MA, ME or PR.
DoorKeeping gives no legal or tax advice. Your tax preparer decides how the 80% test applies to your building.
Sources
- IRS Publication 946, How To Depreciate Property, read Oct 30, 2026
- IRS Publication 527, Residential Rental Property, read Oct 30, 2026
Questions
- Can I use a residential lease for a shop?
- No. A residential lease is written for a home, with home rules about use, deposits and repairs. A shop needs a commercial lease that names its business use, insurance and who pays for shared costs. Have a local attorney review your commercial template.
- How is a building with apartments and a shop depreciated?
- If 80% or more of its gross rental income comes from dwelling units, the IRS treats it as residential rental property with a 27.5 year schedule. Otherwise it is generally nonresidential property with a 39 year schedule. Ask your tax preparer to confirm.
- How much does DoorKeeping cost for a mixed-use building?
- $2 a month per residential unit plus $10 a month per commercial suite, with every feature included.
- Do the same late fee rules apply to shops?
- Usually not. Most late fee caps are written for residential tenants. A shop lease follows its own terms and your state's commercial rules, so check both.