Multifamily - 8 Units

[Angel Meraz]

I've only invested in properties of 4 units or less. I'm exploring an opportunity to buy an 8-unit complex and was wondering about the cash-out refinancing and how the banks determine the value of the property. I've read that for commercial properties, they use the cap rate method to calculate it and to a lesser extent, comps. is this accurate? Also, what is the typical LTV % for these type? thanks.

[John Warren]

@Angel Meraz I have done the BRRRR strategy many times here in the Chicago area with 5+ buildings. The banks do indeed use the cap rate method, although the way they get the NOI is not always as clear as you would think. They really go off the appraisal, so a good broker can help you figure out what your ARV will be. The other thing to keep in mind is that most commercial lenders want to see two years of stable numbers before they will cash out. I learned this one the hard way! Make sure you are ready to hold for 2 years without getting your cash and you will be ok.