Hi all, Rob here, a Louisville agent who works mostly with investors.

$875 billion. That's how much commercial and multifamily mortgage debt comes due in 2026, according to the Mortgage Bankers Association. It's about 17 percent of all the commercial real estate debt in the country. Last year it was $957 billion, and a lot of that got kicked down the road with extensions, which means a lot of it is still sitting out there.

Here's why it matters locally. Most commercial loans aren't 30-year mortgages. They're 5, 7, or 10 years, then the balance comes due all at once. Anything with two or more units is commercial, so this isn't just office towers downtown. It's the fourplex, the 8-unit, the strip center.

Round numbers. Say you bought a fourplex in 2021 with a $300,000 loan at 3.75 percent on a 25-year schedule with a five-year balloon. Your payment was about $1,542 a month. Five years later you still owe about $260,000. Refinance that same balance at 7 percent and your payment goes to about $1,839. That's roughly $300 more a month, or $3,600 a year, out of the same rents.

For a lot of owners that's fine. Rents went up since 2021 too. For some it's the difference between a building that pays them and a building they pay for. And some owners won't get the full amount back from the bank at all, which means they either bring cash to closing, sell, or find a different kind of financing.

How the new loan gets sized: commercial lenders size a loan two ways, and you get whichever number is lower. One is by the building's income, using DSCR (debt service coverage ratio): the net income divided by the yearly loan payments. The other is by value, using LTV (loan-to-value).

Back to that fourplex. Say it brings in $34,000 a year in net operating income after taxes, insurance, and upkeep, and it's worth $450,000 today. At 7 percent on a 25-year schedule, with a lender who wants a 1.25 DSCR and lends up to 75 percent of value, the income test gets you about $320,700 and the value test gets you $337,500. The income test wins, so the loan is about $320,700. They owe about $260,000. So that owner doesn't just refinance. They can pull out roughly $60,000 before closing costs. Same building, very different conversation than the one they were dreading. (Illustration only. Plug in your own numbers.)

What the supply side looks like in Jefferson County as of early October: 153 multifamily buildings for sale, from duplexes up to a 48-unit. The MLS month-end count went from 94 in March to 174 in September, nearly double. 38% of them have already cut their price, and the average cut is 10.6%.

So what do you do with that?

If you own: find your note. Look at the maturity date. If it's inside the next 18 months, you have more options now than you will 60 days before it's due. Refinance, sell, sell to a buyer who assumes or carries paper, or hold and pay down. Every one of those is easier with time on your side.

If you're buying: this is where motivated sellers come from. Not distress for the sake of it. Just owners who have a date on the calendar and would rather make a clean decision than a rushed one. My play is two offers on every building. One is cash or hard money, a fast clean close at a lower number. The other is seller financing, closer to their price, where the seller carries the loan and you pay them every month instead of a bank. A no costs you nothing, and every no is an owner who knows your name when that balloon comes due.

Not tax, legal or lending advice. Run it past your own CPA and attorney.

If you've got a balloon coming due in the next 18 months, what's the plan: refinance, sell, or carry? And for the lenders and brokers here, where are you quoting DSCR on small multifamily right now?