Cash out Refinance BRRR

[Raj Patel]

Hi everyone.

I own a retail building with a partner under an LLC.

Under very conservative valuation at 8% cap rate, I believe the building is worth $1.6M+

I was thinking about doing a cash out refinance at $1.1M with a 30 year term. 

The building is fully occupied as of 2024, and has been showing consistently higher gross rental income on the tax return every single year. 

What are the requirements lenders look for in this scenario? Would it be best to use the bank I have now for the primary mortgage? My worry with them is that their appraisal was way off when I purchased the building, and they used a 10% cap rate which makes zero sense. I made up the gap in their 75% LTV back then.

Besides NOI/Cap rate/LTV (70%) what else would lenders look for? Would I need to submit my personal tax returns, along with those of my partner? Just like with a residential mortgage would they need business tax returns as well for add back purposes? Would our personal mortgages count against us for a cash out refinance? How would they determine qualifying income? Would our gross income with add backs be divided by our ratio in LLC that owns the retail building to cash out on?

Once the cash out is done, I hope to follow the BRRR method and purchase new properties. What would a lender look for then? Same process as a personal mortgage for commercial?

This is a 2 way transaction. Cash out refinance, Purchasing new properties, and searching for them could take up to 4 months I believe. 

Thank you for your help.