If I want to refi a commercial property, plan to what cap rate?

[Jehon Bendokas]

This is a serious look into my first commercial property.

I'm running numbers for a commercial medical space for sale at .144 cap rate due to a full service lease being renewed annually. NOI is projected $72,140, asking price $499K.

Building is rented by a federal government organization since 2009.

How do I estimate the cap rate a lender would cash out this property at?

I would love to think that .10 cap would be the conservative answer but I don't know if that's true. A cap of .10 would give me pretty close to no money in the deal at a 75% LTV.

Also - If someone wants to cough up enough cash to buy it out right, I'd entertain a partnership conversation. 

[Steve Vaughan]

Originally posted by @Jehon Bendokas:

@Steve Vaughan - Thanks for the response! Just to ensure I'm grasping this correctly...

If I purchase the property for $499K - $72,140 at .144 cap putting 25% down then:

Refinance the property at .08 cap = ~$900k w 75% LTV = $675k amortized over 360mo at 6% = $4050/mo PI payments

$72,140/12 = $6012/mo NOI

$6012 (monthly NOI) / $4050 (monthly PI debt) = DSCR of 1.48

I guess it would be the same over a year of 72140/48600 = 1.48 DSCR

Regarding the market analysis - I'll reach out to my lender and see what they can do for me! Thanks!

Sure.  My commercial loans have all been 5/5/20. 5 year adjust,  5 yr call, 20 yr amort.  Don't count on a 30 yr.