Commercial brrrr in chicago - how to get max LTV?

[Michelle E.]

We are looking to refinance a 12 unit appraised at 870K with maximum cash out. We only owe $175 so there is plenty of equity. The bank we have a relationship with would only give us $250K (which would leave us with $70 cash in hand) - thats only 28% LTV! That is the max they would go but offered an excellent rate. We keep hearing about the BRRRR method and getting up to 75% LTV but where to you go to get it? Credit is over 800, building fully occupied and cash flowing and we have 5 years managing the property successfully. Is this something that we need to talk to a loan broker about or can we go directly to a bank? Who have you had success with? Our goal is to expand our RE portfolio and take advantage of the current favorable rates.

[John Warren]

@Michelle E. I think a lot of folks don't go into a lot of detail about how important the financing side of things is when it comes to commercial RE. I ran into the same issue two years ago when I did a BRRRR deal in Cicero, and I could only get 80% LTC (not LTV) when I went to refinance one year in. With your situation, I would speak to several other lenders since you have more than 2 years of operating data. Local banks do have some constraints when it comes to doing cash out refinances based on the amount of cash you put in, and this is especially true of the bank that originally lent you the money unfortunately.

Another angle would be to see if you can get that appraisal just a pinch higher. Agency debt will go as low as 750k on a loan balance and they will do 80% LTV all day long on a cash out refinance if you are in work force housing types of areas. This is pretty broad I found as my Berwyn property qualified, and it is a nicer property. The other cool thing about them is that they have the 15 year terms... so you aren't playing this game every 5 years.