Newbie question about hard money and refinancing

[Alex SImon]

Okay, this might be a tired old question but so far I haven't seen it covered in any detail (I might be totally overthinking the problem). A lot of people talk about using HML to get you into a deal that you might not have the capital to do on your own, and the idea is then to refinance the property to pay off the HML. But my question is, how do you know ahead of time if you're going to be able to refinance?

In this situation, I'm looking at the possibility of a small apartment complex, 24 units, should cash flow between 1-2k a month after the commercial mortgage and expenses. I plan to keep this as a long term rental property in my portfolio. However, I won't have enough capital for the down payment any time soon. The common solution to this type of problem seems to be "HML to buy the property, refi out after 6 months or so and then pay it down from there". But, being the newbie I am, I am questioning how to know if a bank will approve a refinance.

The property does not (on the surface, no inspection yet) need any serious rehab, mostly fresh paint and carpet here and there.

The property is almost fully rented and would generate positive cash flow from day one.

What other factors might play a part in whether I'm approved for refinancing?

What's the likelihood that a guy like me with good income and good credit would find himself unable to refinance this complex to pay off the HML?

[Jon Holdman]

The hard money then refinance route works when you have a way to add significant value. Some HMLs will lend based on ARV. So, you buy, fix up, get the place rented, then refi based on a higher value. It rarely results in getting a deal with no cash out of pocket, but it can be less than the 25% down payment plus rehab costs.

Whether it works for this deal or not is the question.  You say it doesn't appear to need rehab.  Are the rents at market and the place is fully rented (fully for 24 units probably translates into only one or two vacancies, you'll generally not be 100% full all the time unless your rents are below market.)  A 24 unit building is valued based on the rent produced.  So, unless there's some upside you've not mentioned, you may have a hard time increasing the value enough to make this work.