Has Anyone Done a Commercial BRRRR?

[Jake Marin]

I'm under contract to purchase a 5 unit multifamily building. Being over 4 units makes this "commercial" from a lender perspective so I'm going through my first commercial financing process. The lender is looking for 20% down which I plan to do with a HELOC I've already got in place. What I'm wondering is whether or not anyone has ever done a BRRRR under a commercial loan. I've got to get my HELOC $ back out or I won't be able to scale up and repeat this again. Any thoughts?

Some more details: 

Contract purchase price - $144,000

Assessed value - $189,000

Cap Rate @ $144K - 14.7%

Property value @ 10% Cap Rate - $197,000

Lender informed me that they will loan 80% LTV or purchase price, the lesser of the 2 - so not possible to loan 100% of purchase despite results of valuation.

Any thoughts? BRRRR potential? Other ways to get my ~$30K out for additional investment?

Jake

[Todd Dexheimer]

Yes, doing a BRRRR on commercial real estate is done all the time. Buy the asset, add the value, prove the income and then refi. You likely will need to season it for 6-12 months before most lenders will want to lend on appraised value alone, but call around to all of your local banks.