Is a Commercial Brrrr possible?

[Ryan Carter]

This is a completely selfish question but maybe the conversation will help others in the future that are in my position. I purchased a commercial property back in August of 2017 and have been slowly throwing money into it. Looking ahead I’ve started reaching out to local banks about refinancing and pulling my cash out, but I’m running into comments like “there’s no such thing as a long term commercial loan” or “Why would you want to do that?”. I’m getting more crazy looks than I originally anticipated! Currently I have the property financed with a 5 year commercial loan, amortized 20 years at 5.5%. Has anyone else successfully Brrrr’d a commercial property? If so, would you mind explaining the steps that were involved that would differ from a residential Brrrr?

[Robert D.]

Ryan: Yes, the BRRRR method in commercial is very common, although you won't hear it called that. I have two properties that I'm following a BRRRR approach on right now.

NOI is NOI . . . the only difference is your cap rate at refinancing might be higher since apartment caps are generally stronger. But in many cases you can find the key value adds (higher vacancy, under market rents) in commercial and your returns can be higher, but deals will typically be bigger $750k-$5mm. Hope this helps