New to Real Estate · Member since 2026 · 16 posts · 7 votes
I have a commercial property that is currently leased for 3.5 more years NNN, with two more options of 5 years each. It is operating as a laundromat. Remaining loan of $153k 6.75% 5 year balloon over 20 years (15 years left). I just renewed after the first 5 years. Cash flow is slim. The loan is with a local bank in my small town and they want my personal finance records at every renewal.
Does it make sense to refinance to a different loan structure? I'm just learning about DSCR loans (not sure if you can do this on a commercial property), private lending, etc. Also considering a cash out refinance to purchase the next property. I'd have to get a lower interest rate on the cash out in order to keep the first property cash flow positive.
I have a commercial property that is currently leased for 3.5 more years NNN, with two more options of 5 years each. It is operating as a laundromat. Remaining loan of $153k 6.75% 5 year balloon over 20 years (15 years left). I just renewed after the first 5 years. Cash flow is slim. The loan is with a local bank in my small town and they want my personal finance records at every renewal.
Does it make sense to refinance to a different loan structure? I'm just learning about DSCR loans (not sure if you can do this on a commercial property), private lending, etc. Also considering a cash out refinance to purchase the next property. I'd have to get a lower interest rate on the cash out in order to keep the first property cash flow positive.
Interested in any thoughts and advice y'all have!
Hey Catherine,
It will be tough to find similar terms on a commercial property with a DSCR loan. I am seeing these roughly in the high 7s to 11% depending on the LTV & PPP structure.
A local bank or credit union will be a best fit for this scenario
If you do go back to a local bank or approach a new one, come prepared with everything. Full rent roll, the lease terms and remaining options, NOI breakdown, your debt service coverage at different rate scenarios, and a clear written plan for what you're doing with any cash out proceeds. Local banks respond well to borrowers who walk in organized. The more work you do for them upfront, the smoother the conversation goes and the more leverage you have on terms.
I have a commercial property that is currently leased for 3.5 more years NNN, with two more options of 5 years each. It is operating as a laundromat. Remaining loan of $153k 6.75% 5 year balloon over 20 years (15 years left). I just renewed after the first 5 years. Cash flow is slim. The loan is with a local bank in my small town and they want my personal finance records at every renewal.
Does it make sense to refinance to a different loan structure? I'm just learning about DSCR loans (not sure if you can do this on a commercial property), private lending, etc. Also considering a cash out refinance to purchase the next property. I'd have to get a lower interest rate on the cash out in order to keep the first property cash flow positive.
Interested in any thoughts and advice y'all have!
Hey Catherine,
It will be tough to find similar terms on a commercial property with a DSCR loan. I am seeing these roughly in the high 7s to 11% depending on the LTV & PPP structure.
A local bank or credit union will be a best fit for this scenario
Catherine, great questions and you're thinking about this the right way by stress-testing cash flow *before* pulling the trigger on a cash-out.
A few things worth unpacking:
**DSCR loans on commercial properties** traditional DSCR products (the kind built for 1–4 unit residential investment properties) generally won't apply here. A laundromat is a commercial/special-use asset, which puts it squarely in portfolio lending or small-balance commercial loan territory. The previous reply is correct that rates in this space are running higher than conventional and terms (amortization, balloon structure, prepayment penalties) vary widely by lender.
**What you already have may be better than you think.** A 20-year amortization with 15 years left at 6.75% is actually a reasonable structure for a special-use commercial property. The recurring personal financial disclosure requirement at renewal is standard practice for community bank portfolio loans — it's not a red flag, it's just how that lending relationship works. That said, if the relationship feels intrusive or the bank keeps tightening terms, it's worth shopping.
**On the cash-out refinance idea:** This is where you need to run the numbers carefully. If cash flow is already slim at 6.75%, refinancing into a higher rate even with cash out means you'd need meaningful equity *and* rent coverage headroom to make it work. I'd model it conservatively: what does DSCR look like at 8%, 8.5%, 9%? If it goes negative, the deal breaks regardless of how attractive the next acquisition looks.
**Alternatives worth exploring:**
- Small-balance SBA 504 or 7(a) loans (longer amortization, fixed-rate periods, but documentation-heavy)
- Portfolio lenders and credit unions that specialize in small commercial
- Private/bridge lending for a short-term cash-out if you have a clear exit strategy
With 31 years in the mortgage business and a fair amount of time working with investors on DSCR and portfolio structures, the honest answer here is: the local bank may still be your best rate, but it's worth getting a second opinion on the full picture before your next renewal cycle.
My first thought is that if cash flow is already slim, I'd be cautious about pulling additional cash out unless I was very confident the proceeds would generate a stronger return elsewhere. It's important to look at the entire picture, not just the interest rate. A lower rate is great, but I'd also want to understand the fees, loan term, balloon risk, and how the new payment affects cash flow.
The long-term NNN tenant is certainly a positive, so it may be worth talking with a few commercial lenders and comparing options before making a decision.
Local community banks and credit unions will provide the best terms. Most credit unions don't have pre-payment penalties which is another benefit if you were to go the Credit Union route. If cash flow is tight, going to an alternative lender will almost certainly be more expensive. Also, you may be putting too much weight into the fact you have a NNN lease. Not all NNN leases are created equally. I don't know enough about laundromats to understand if there's true credit laundromat tenants but unless the NNN lease is tied to a credit or credit equivalent tenant, the fact you have a NNN lease doesn't move the needle with most lenders.
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