Cash Vs Finance

[Sandeep Shukla]

All,

I am new here and new to commercial real estate investing. I do have a few single-family homes rented out. This will be my first apartment building investment. I could use some advice from experienced investors here what would you do?

I have purchased an apartment building (with 9 units) in an auction deal. Since this is an auction deal I have a hard deadline to close. I have 2 options:

1. Financing: 65% LTV, 7.5% interest rate, 7 years

2. Pay cash and then after 6-9 months do cash out refinance. - in this case, I will have more time to shop around for better loan terms/rates etc. 

Thanks

Sandeep

[Chris Mason]

Quote from @Sandeep Shukla:

All,

I am new here and new to commercial real estate investing. I do have a few single-family homes rented out. This will be my first apartment building investment. I could use some advice from experienced investors here what would you do?

I have purchased an apartment building (with 9 units) in an auction deal. Since this is an auction deal I have a hard deadline to close. I have 2 options:

1. Financing: 65% LTV, 7.5% interest rate, 7 years

2. Pay cash and then after 6-9 months do cash out refinance. - in this case, I will have more time to shop around for better loan terms/rates etc. 

Thanks

Sandeep

 What's the prepayment penalty on option 1? A lot of the apartment loans I do have none, so if that's the case, proceed with option 1 and refinance whenever it suits you. I don't have enough details to opine on the rate/terms being good/bad, but it's not vastly outside the ballpark.

For option 2, why are you assuming you'd have to wait 6-9 months? The "seasoning" thing is for home loans, this isn't a house. :)