Helping calculating ARV for a duplex in a commercial loan

[Joshua Baldovino]

Hello. I’m trying to figure out how much I’d leave in a Brrrr deal originally financed by hard money. 

The duplex we have under contract is the smallest of all the comps. However, on a cash out commercial refi, do banks account for rental income in establishing the ARV or is only based on the average price per sqft, condition, and amenities?

For context, after rehab and refi this would hit around 1.2% rent to price ratio. But does that even matter in the appraisal? Thanks!

[Kevin Romines]

You can do a 2 unit as a commercial loan, however you will get better terms if you do it as residential. If its in an LLC, you can revert it to personal ownership and do a Fannie Mae refinance and then after refinancing, move title back to the LLC. Fannie Mae changed their rules to now allow this as of 6/1/2016.

Based on doing this as residential, you can do cash out up to 70% of the appraised value. Or maybe a better set up is to do a no cash out up to 75% followed by a HELOC from Pen Fed Credit Union up to 80%, so long as you own 4 properties or less (including your primary) Pen Fed has the best terms available on Non-Owner occupied properties.

Commercial will be rates as much as 2% higher than a residential loan. See Fannie Mae's updated guidelines down below: