Refinancing a commercial property

3 Replies

I'm looking at owner-financing a 30 unit multi-family for about $1.6M, with monthly payments, and a ballon payment in 3 years. 

Question: 

Will the bank refinance me after  year one or two with no down payment?  For example:

If I were able to bring the property value up to $2.5M, and the bank refinances me at 75% of the $2.5M value,  would they let me cash out $1.875M (75% of the $2.5M) and pay off the owner ($1.6M balance)? 

Thank you in advance of your responses. I don't want to get stuck with a building that can potentially default.

Depends on the lock-out period. You will probably just go for a "supplemental loan" to get a cash back. Check out Sabal and Greystone as they dominate this $1-3MM loan landscape.

@Joseph Duenas yes this is potentially doable. I do this quite a bit for clients but all depends on the situation. My recommendation would be to that the next three years and improve NOI as much as possible to make it an easy sell.

Good luck. 

@Joseph Duenas The hiccup is that you don't know if lending requirements today will be the same as lending requirements in 3 years. I'd have some conversations with community banks. In many cases they keep the loans on their books. If they're holding the note they can set their own rules. Of course, that could mean requiring professional property management, some amount of capital set aside for reserves, etc.