Refinance Vs Sell multifamily rental

[Louis L.]

Upon completion of a multifamily building renovation - do you usually sell the entire building, or refinance it to get the equity and hold it for the residual cash flow?

As far as a business plan, I am struggling with which strategy to go with. I can calculate an after repaired value based on the final/new rents - but i am wondering how likely it is for an investor to come along and purchase the investment property (now that it is a stable/safer investment choice).

My goal is to generate cash for a subsequent investment, so im sure selling/10-31 exchanging may be best, but i dont know if its a good bet per se. I dont want to expect to be able to cash out entirely if thats not viable. For context, im thinking about this in the greater NYC/NJ area.

Thanks all for your input.

[Joseph Gozlan]

@Louis L. 

I'm assuming we're not talking small 2-4 units properties. For the larger properties, a couple of thing to consider:

1) Do you feel lucky? Multifamily rehab and stabilization is usually a long process that takes 8-24 months. With a correction looming on us, I don't know anyone that can tell you if it'll happen in 3 months or 3 years. If your entire strategy is based on a hefty exit and you find yourself trying to sell as the market drives prices down, it's a bad position to be in.

2) Do you feel lucky #2? 1031 is another gamble. I've seen investors do bad decisions because of the pressure of finding the next property on time. 

Personally, I prefer the refinance and hold strategy because loans are not taxable and after a refi you still have an asset!

My advice would be to underwrite the property both ways and make your purchase based on the worse one.