Commercial Loans: After the BRRRR Has Gone

[Dwight Sands]

We hear a lot about apartment BRRRR/Value Add projects but not much about the picture after that initial cash out refinance. What strategy are people taking who intend to hold them and not sell them? Continually refinance before the balloon?

[Nick Schoch]

You can find full term loans for apartments where the loan fully amortizes with maturity. Most of these options are not fully fixed, though. Instead, they have a hybrid structure where the loan is fixed for the first 3-10 years and then floats/adjusts based on an ARM Margin over an index until maturity.

Agency (Fannie and Freddie) programs offer hybrid options but they generally still have a bullet since they offer 30-year amortizations against 20-year terms. See here for an example of Freddie's Small Program.