Commercial refi options

[Roland Rodriguez]

I have a commercial property in Texas that includes 3 STR's, a retail storefront, and additional space that is leased to a neighborhood bar and a successful food trailer. Altogether, it generates annual revenue between $125k to $135k.

When I acquired the property in 2017, we used it as a 2nd home to have large family gatherings and weekend getaways since it is near all river attractions in New Braunfels. We financed it with a 2nd home mortgage with a 5 year ARM starting at 3.25% amortized over 25 years. It adjusted earlier this year to 4.75%. It will adjust each year moving forward.

In 2019 we started to see tremendous potential with the property. It's zoned for both residential and commercial use as it sits on a very busy commercial road. In the last few years we're seeing unbelievable growth and appreciation all around us. We decided to sink over $100k in property improvements in 2019 and converted the entire compound to its present use with the STR's and commercial lease space.

My question is: should I look to refinance into a commercial mortgage or just keep my current 2nd house mortgage that will adjust every year?

The property was purchased for $400k in 2017 and is now worth at least $800k per the 2022 tax appraisal notice. I’m confident that a market appraisal would be close to $1 million based on the growth and appreciation in New Braunfels. I’m not interested in taking any cash out. My plan is to use the equity as part of our retirement in a few years when we sell it.

Thanks everyone!