Commercial real estate refinancing question

4 Replies

Hi guys, I'm a newbie for commercial real estate investment,I have a question about refinancing the property. I didn't have much money to buy this commercial apartment building, so I used HELOC as down payment to bought this property, and the rest I took mortgage. For BRRRR method, how do I refinance the property and get some money back to invest on more properties? Do I have to pay off HELOC and mortgage first? What the refinance can really help if I have HELOC and mortgage? Is there a smart way to get rid of HELOC? Thank you!

I would start by finding out any restrictions, requirements, or penalties on the loan you took out. Such as yield maintenance, defeasance, and seasoning. Those would then inform my refinance plans. It's hard to say exactly what decision I would make without knowing the full situation.

You need a cash-out refinance. How you use that cash is up to you, but the lender may want you to deleverage. Most banks will want the property to season before providing a cash-out refinance.

Get in touch with a local mortgage broker to get a better sense of the market for your particular deal.

Regarding strategy, your level of indebtedness is a very personal decision. Keep the HELOC if it enables you to build the business you want.

@Mengzhu Rolff I'd recommend first underwriting the property to get a ball park value at the time of acquisition then run the numbers in it's current state.

When it comes to commercial properties, lenders determine value based on stability and P&L's, you have to prove to them the new value through increased income

Originally posted by @Mengzhu Rolff :

Hi guys, I'm a newbie for commercial real estate investment,I have a question about refinancing the property. I didn't have much money to buy this commercial apartment building, so I used HELOC as down payment to bought this property, and the rest I took mortgage. For BRRRR method, how do I refinance the property and get some money back to invest on more properties? Do I have to pay off HELOC and mortgage first? What the refinance can really help if I have HELOC and mortgage? Is there a smart way to get rid of HELOC? Thank you!

No need to pay the heloc. Cash out refi and  repeat.