Refinance Multi-Family Properites to buy a Commercial property

[Karla Thomas]

Hello, BP. 

I hope I can get some great advise with this situation. 

A few years ago, I purchased a SFH in an up and coming area. I acquired a significant amount of equity and sold in 2015. I used the equity to purchase a few Multi-Family properties in another state (8 units total - (1) 4 unit bldg, (1) 2 unit building and 2 SFHs). I paid cash for the properties and rehabbed to rent them out. I took a year off from my job, paid for grad school and slowly worked to get everything in place. It wasn't easy to say the least but I fought tooth and nail to get it done. Fast forward to 2017, my units are now rehabbed, rented and my positive cash flow is ~$5,000/month. I recently went back to work to generate some additional income. After it was all said and done, since I was unleverage with all properties, I used up most of my liquid. If I had to do it all over again, I would have leveraged the properties. My original plan was to invest and hold for the long term. I am now looking to invest in a commercial property to diversify my portfolio and use the property to start a business in about another year or two. I would also like to continue to buy more MF properties but commercial is my sole priority at this time. Tall order, huh? :)

My question:  Would it be realistic to speak with a bank about refinancing my MF units without two years of rent rolls and just starting back to work after a year or so without income?  Should I even think of refinancing my MF units to purchase the commerical property?  I have enough equity in the 4 unit bldg to buy a small commercial property and use the rent and pay check to slowly rehab the property over time (again unleverage construction) or is it best to do a construction loan for the commercial property?  I have never worked with commercial properties and pretty nervous about entering this market.  

What makes the most financial sense?  Any assistance would be greatly appreciated.  Thanks!! 

[Anthony Dooley]

The bank would refinance the properties without a down payment. You can probably get a Line of Credit, like a home equity loan for up to 75% of the property value. If the properties are in a trust, that only affects who needs to sign the paperwork. The trust gets a loan and the trustee signs for it.

Do not let fear prevent you from taking action. Go to the bank and tell them what you want to do. They will figure out the best way for you to do it. The property stands as collateral for the loan.