5 Unit+ MF Cash Out and refi restrictions - BRRRR

[Jay Norlund]

Calling all experienced mid range multifamily investors and especially lenders! I haven't been able to find a thread that discusses this in the detail that is as helpful as a few threads have been on 1-4 unit BRRRR strategies.

I had a deal negotiated for two triplexes on one parcel that ultimately fell through but had me doing enough research to realize most of the info out there is generic. So, what issues, rules and restrictions are there for the mid-range of multi-family (5 to say 12 units)?  I know a lot of people rely on cash out refinancing larger multifamily as a strategy but in trying to get financing for the deal and rehab, I came across a lot of issues.

Some questions to get us started (feel free to add your own questions and advice, I would love this thread to be a main place people can go for info on these types of properties):

What issues are there for getting cash out of a commercial loan with rehab costs (whether separate or rolled in)? Timing, LTV restrictions, etc?

When using seller financing, what terms apply for the refi? 12 month wait? Other issues?

How does using a bridge loan or interest only for the rehab portion affect the eventual refi?

[John Warren]

@Jay Norlund I am in the middle of a BRRR deal in Cicero, IL. The property is a 6 unit, and it has been very challenging to find a bank that will do a cash out refinance of 75-80% of the ARV. I need 75% to get all of my cash out, but most banks want to lend 75-80% of my LTC (loan to cost). That would end up leaving 20-25% of my money in the deal. The only work around for this is to hold the property more than one year, but my term on my hard money loan is up at 1 year.

If I could do it over again, I probably would have pushed harder to use a construction loan with interest only. One of the lenders I work with would allow me to do a regular 5/25 commercial loan for 75% LTV, but would include 6 months of interest only. That would have juiced my cash flow a bit more.