What Makes You Consider a Refinance?

Question

For investors who have built equity in a property, what usually makes you consider refinancing?

Is it primarily:

• Accessing equity
• Restructuring existing debt
• Funding another investment
• Improving liquidity
• Financing improvements

Accessing equity

Restructuring existing debt

Funding another investment

Improving liquidity

Financing improvements

What usually triggers the conversation for you?

Noah Wright · Answer

Your list is a good one, and the two that come up least in threads like this are restructuring and timing. The restructuring triggers I see most are a balloon coming due on a portfolio or seller-carried note, a prepayment penalty that's about to step down or burn off, and rents that have climbed enough that the property now supports a bigger loan on a DSCR basis. Timing is the other piece. Many DSCR programs want some seasoning before they'll use the new appraised value, so the conversation usually starts a few months before the refi can actually happen. A refinance earns its place when what the new money does beats what the new loan costs, closing costs and any prepay included.

Frankie Vozzi · Answer

Linda, from the lending side, one of the most interesting triggers I see is when an investor realizes the equity sitting in one property could help them acquire the next one.

At that point, the conversation becomes less about simply getting a better loan and more about whether accessing that equity actually helps the overall portfolio.

I'm curious from the broker side are most of your investor clients refinancing to improve an existing position, or are they usually trying to free up capital for another acquisition?

Greg Kasmer · Answer

@Linda Murray - For me, refinancing is about pulling your money back out in order to do the next deal. I just completed one for a quad I purchased 18 months ago where I was able to pull out ALMOST my entire amount of funding.

Alex Bekeza · Answer

In my case, it's usually about opportunity cost because I'm at the stage of my career where I'm scaling. I only do value add deals so each one is going to go through a refinance in the 1st year.

Caleb Brown · Answer

It's common now to tap into equity or pay off a short term loan (with BRRRs)

What Makes You Consider a Refinance?

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