BiggerPockets

Basics of commercial real estate refinance

5 posts by 3 users

Grant Hwang

from Seattle, Washington

Jun 26 '11, 01:00 AM


I never refinanced a commercial real estate loan. Anything I should know before I start shopping? Or is it pretty straight forward.

Details:
10,000sqft office building
1/2 occupied
this property does not have positive cash flow but I have positive cashflow overall
value is 1.5mil
current balance is 400k
current interest rate is about 6%

I want to refinance the 400k and maybe do about 200k cash out, so still good LTV. 200k is for down payment on another property. hopefully also lower the rate.



Darryl Dahlen Donor

from Southern Maine, Maine

Jun 26 '11, 05:34 AM


Based on the information you've provided, you may run into some problems trying to refinance your property.

The fact the property is at 50% occupancy, and can't serve the debt, is going to be a big issue with lenders. Especially, given the property type.

The fact you want to do a cash-out refinance is going to further compound the issue. To be honest, I don't know of any lenders who would allow a cash-out refinance on a positive cash-flowing office building let alone a non-performing one.

There's such a glut of office space in most markets that lenders are leery of this property type right now. Too many are in the position yours in, and in a lot cases, the NOI doesn't support the debt any longer and/or the property is upside down with regards to its appraised value.

Point being here is that if you find a lender who will let you do a cash-out refinance please share it. You will have truly found the needle in a haystack.



John Broussard

Real Estate Broker from houston, Texas

Jun 26 '11, 06:35 AM


What state is the property located in?



Grant Hwang

from Seattle, Washington

Jun 26 '11, 08:11 AM


Originally posted by Darryl Dahlen:
Based on the information you've provided, you may run into some problems trying to refinance your property.

The fact the property is at 50% occupancy, and can't serve the debt, is going to be a big issue with lenders. Especially, given the property type.

The fact you want to do a cash-out refinance is going to further compound the issue. To be honest, I don't know of any lenders who would allow a cash-out refinance on a positive cash-flowing office building let alone a non-performing one.

There's such a glut of office space in most markets that lenders are leery of this property type right now. Too many are in the position yours in, and in a lot cases, the NOI doesn't support the debt any longer and/or the property is upside down with regards to its appraised value.

Point being here is that if you find a lender who will let you do a cash-out refinance please share it. You will have truly found the needle in a haystack.

Darn, I still will try on Monday. Can't hurt to ask.



Grant Hwang

from Seattle, Washington

Jun 26 '11, 08:12 AM


Originally posted by John Broussard:
What state is the property located in?

Seattle, WA

Highly desired location.



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