DSCR or Conventional Loan: Refi with cash out

Member since 2026 · 3 posts · 0 votes

I have a 4-plex apt bldg with a market value between $350-400k and a loan of $97k. I was looking to do a cash out refi to pay off some debt (less than $25k). I also own a 3 bay SS car wash with an MV around $75-100k and a loan of $30k. I am also looking at doing the same with the car wash. I’ve tossed around the idea of using equity in apt bldg to pay off car wash but I think I’d rather pull tax free money from that and use it for the next investment. I also have a family member with two 4-plexes and is interested in selling but off market without a bank. Why would he want to do that? I have my thoughts but just wanted to see yours. Thanks!

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Vaibhav PuranikPro Member

Member since 2025 · 112 posts · 59 votes

15h

Here are potential reasons - The four plex doesn't generate enough income to appeal broader market, The four plex is waiting for a lot of CapEx (it has deferred maintenance) or the most benign one - they just wants to get rid of it as easy as possible and they have you in front of them.

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Vaibhav PuranikPro Member
Member since 2025 · 112 posts · 59 votes
15h
Here are potential reasons - The four plex doesn't generate enough income to appeal broader market, The four plex is waiting for a lot of CapEx (it has deferred maintenance) or the most benign one - they just wants to get rid of it as easy as possible and they have you in front of them.
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- Kevin Pugliese
  OP
  Member since 2026 · 3 posts · 0 votes
  15h
  I agree with those reasons especially the income and maintenance. The rents are way below market and he’s had long term tenants. One building needs a new roof as well. Thanks for the reply.
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Ametria Chaney
Realtor · Memphis, Shelby County · Member since 2026 · 274 posts · 98 votes
15h
Kevin, with a four-plex it usually comes down to how the lender underwrites you, not just the rate. A conventional refinance can be cheaper if your personal income, credit, and debt-to-income fit, and you can document everything cleanly. A DSCR loan looks mainly at whether the property's rent covers the payment, which can help when your personal income is the limiting factor, but it often comes with a higher rate and fees, so I would compare the total cost and monthly payment side by side, not just the headline rate. Before you pull cash out, be clear on its job: paying off higher-cost debt, keeping a reserve, or funding the next investment. And check with your CPA about how the proceeds are treated. On the off-market family sale, some sellers prefer privacy, speed, and fewer showings — but still use a contract, title, and appraisal or valuation, so both sides are protected.
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- Kevin Pugliese
  OP
  Member since 2026 · 3 posts · 0 votes
  14h
  I'm definitely leaning towards the conventional route but definitely see the difference with a DSCR loan. I'll compare them both to be sure. The cash out would be exactly for those three reasons you've mentioned and I will consult with my cpa for sure. The off market sale is strategic on their part for sure. The owner is also a real estate attorney so the title and legal paperwork, are always free for me. The rents are way below market so I would immediately raise them to an acceptable market rate that would keep the tenants and be able to pay the debt. Thanks for your reply!
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Devin PetersonBusiness Member
Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 679 votes
12h
Kevin, a few things worth comparing. A car wash is a special-purpose commercial property, so lenders usually treat it separately from the 4-plex and the loan terms (shorter term, balloon, lower leverage) can differ a lot. With the 4-plex rents well below market, a DSCR loan qualifies off in-place leases or an appraiser's market rent schedule, so how and when you raise rents will affect the loan size. If you don't want to touch a low-rate first mortgage, a second-position HELOC or DSCR HELOC taps equity without refinancing the first, usually at a higher rate. With $97k owed on $350-400k of value you have plenty of equity, so borrow only what you need and make sure rents comfortably cover the payment. Compare total cost (rate, points, appraisal/closing costs, prepayment penalty on DSCR) and, as mentioned, check tax treatment with your CPA.
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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
11h
Hey Kevin,
Happy to connect on the lending side.
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Dan Duenas
Lender · Irvine, Orange County · Member since 2026 · 69 posts · 36 votes
11h
With ~$250K+ of equity in that 4-plex, both work — the question is what you're optimizing for.
Conventional cash-out is usually the cheapest money, but it's full-doc: tax returns, DTI, the whole file. If your income and credit are clean, that's the lean I'd follow too.
DSCR cash-out qualifies on the property's rent alone — no personal-income docs, no DTI calculation. The trade is a higher rate, a prepay penalty to watch, and minimums that matter here: DSCR cash-out programs start around a $50K loan, and you can go up to about 75% of value on a cash-out at strong credit. Paying refi closing costs to move $25K of debt is a tough way to spend money.
Honest take for just $25K of debt: a 2nd-position investor HELOC on the 4-plex is probably the cheapest path. No appraisal, draw only the $25K, leave the $97K first alone. Then compare the all-in cost of each option, not just the rate.
The car wash is a different world — that's commercial lending, not my lane. A commercial broker is the right call there.
On the family member selling off-market: usually privacy, avoiding agent fees, or not wanting a bank appraisal and contingencies in the deal. Can't know without asking them, but those are the usual three.
Happy to run your numbers on the 4-plex if you want a second set of eyes — Dan
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Jim BlackburnBusiness Member
Lender · Florida Based (48 states Puerto Rico) · Member since 2017 · 324 posts · 123 votes
10h
Kevin, a few thoughts from the lending side:
4-plex: You have a lot of equity for a $25K need. A 2–4 unit investment property usually maxes out around 70–75% LTV on a cash-out refi, conventional or DSCR, so you could pull far more than $25K. The real question is what your current $97K loan's rate is. If it's low, refinancing the whole thing to get $25K may cost you more over time than a second-lien option.
Conventional vs. DSCR: Conventional usually prices better, but it qualifies you on tax returns and debt-to-income. DSCR qualifies on the property's rent, so it's often easier if your returns show heavy write-offs. In exchange, expect higher pricing and often a prepayment penalty. Run both.
Car wash: That's commercial property, so residential DSCR and conventional loans won't touch it. Look at a commercial bank or SBA loan.
"Tax-free": Cash-out proceeds aren't income, but whether the interest is deductible depends on what you spend the money on. Using it to pay off personal debt can make that portion non-deductible. Worth a quick call with your CPA.
Your family member: Selling off market with seller financing can let him spread out his capital gains through an installment sale and earn interest income. He can also skip lender appraisals and repair requirements and close faster. Have an attorney draft the note, and check for a due-on-sale clause if he still has a mortgage.
Happy to run numbers if useful.
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Stephen Foster
Member since 2026 · 24 posts · 5 votes
8h
Kevin — with ~$250k+ of equity and only ~$25k of debt to clear, a full cash-out refi of the $97k first is often the expensive way to solve a small need. Worth pricing three paths side by side: (1) conventional cash-out if your personal income/DTI docs are clean, (2) DSCR cash-out if write-offs or DTI are the issue (watch prepay and in-place vs market rents), and (3) a 2nd-position / investor HELOC that leaves a low first alone. The car wash will not fit residential DSCR/conventional. Happy to compare structure once you share the state and the rate/balance on the current 4-plex first.
– Stephen
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Marc Del Priore
Lender · Philadelphia, PA · Member since 2024 · 55 posts · 16 votes
5h
Kevin, with that much equity in the 4-plex you have good options for a cash-out refi. We would look first at the in-place rents and the current rate on the $97k loan, since a DSCR cash-out qualifies on rent alone while a conventional cash-out usually prices better if your income and credit are clean. The car wash is a different lane, as commercial lenders underwrite it on its own income and will not fit a residential DSCR loan. We are Royal Partners and we arrange cash-out refinances like this. DM us the 4-plex rents, your current rate, and the market where the property sits and we will give you straight numbers on what a cash-out could look like.
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