Refinancing Strategy

4 Replies

All, I have a question regarding cash out refinancing as a means to hopefully provide investors with a return on capital. My question is; is there a rule-of-thumb or ideal acquisition structure that would help you get to a 100% return on capital? I understand the NOI implications in getting a higher appraisal.

So, is there an ideal LTV to get when you acquire the property to help you get 100% return on capital? Meaning 70%LTV year 1 -> 75%LTV year 3 (refi). Or 75%LTV to 75%LTV. Generally speaking what measures do you take during the acquisition of the asset to help stack the odds in your favor?

I would greatly appreciate any and all feedback!

@Daniel G.

What type of property are you looking for? Single family, Multi family, Commercial? What strategy? Flip, Buy and Hold, BRRRR? I'm assuming B&H/BRRRR. There are too many variables to consider unless you provide the type of property and strategy intended.

@John Leavelle I am referring to multifamily. I currently own a 56 unit property but am looking to get a larger one under contract in the near future.

@Daniel G.

Ok, I have only been concentrating on small multi (2 - 4 unit) and small apartment (5 - 20 units). I would use the same criteria for larger properties I believe. Distressed properties with definite "Value Add" ability. High vacancy rate, below market rent rates, obvious rehab and upgrades needed, etc. If it's a poorly performing property it makes it easier to buy at a bigger discount. That seems to be the best method to achieve your goal. The rest depends on your turn around time. Of course you must be certain of the Cap Rate to get your projected Value after you improve the NOI. Just my two cents. :)

REFI with Freddie Mac or Fannie Mae for a non-recourse loan. Nothing beats it.

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