Multi Family REFI Strategy

3 Replies

Im sure something like this has already been covered in the forums but I just have a couple questions..

I have private investors lined out for 9% APR (Interest Only), which I will use their capital to buy multi-family units. 1 year after obtaining these properies I want to refinance these properties and pay off the private investor funds while taking longer term mortgages at lower interest rates with a bank or mortgage broker.

My questions are: 1) are refinancing multi family units more difficult than single family homes?
2) how difficult would it be to refinance these properties under a 30 year term.
3) typically, what percentage of the appraised value will I be able to take out of the refinance to pay off the private investors?
4) does this sound like a good strategy for buy and hold investing?
5) are there any other factors I need to consider to make this work??

My biggest concerns are the ability to refinance these properties (I dont want to get stuck paying 9% interest only), and the ability to be able to pull enough funds out of the refinance to pay back the private investors.

Let me know what you guys think, any advice would be much appreciated!


#1 refinancing multi-unit is no more difficult than single family homes.

#2 a portfolio lender, ask for the commercial department even though it is a residential loan, which is a local lender in your own backyard that holds the loans on its books, typically requires a DCR of 1.25> and an ARV (after repair value) of between 70-80%.

#3 a portfolio lender typically lends on 20 to 25 year amortizations with 3 5 & 7 year balloons.

#4 this is a great strategy and one that I use however you need to speak with the portfolio lender to find out about their seasoning requirements. That is how long do you have to wait after you rehab and place tenants before they use the improved value? Sometimes it is 6-12 months.

#5 a portfolio lender which looks at the cash flow and ltv of property instead of your income and dti's usually will only lend to an entity like an LLC.

Hope that is helpful .

I agree with all the above with one more item to consider.  To refi out your investors, you will need an appraisal high enough so that the new debt replace the investors. Appraisers are required to provide a sales history as part of a commercial loan and getting a big increase in appraised value within a year may be difficult. I would budget  for two years unless I have a really strong repositioning plan in place that could show significant rent increases have taken place.  Even with that, many lenders want a trailing 12 month history for determining income levels.

We do a lot of apartment lending so feel free to contact me if you want some more insight.

Nicolas Paez

[email protected]

William Kothmann Did you ever move forward with this plan? This is exactly what I'm looking into at the moment so I would love to hear how it went for you!

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