What are the benefits of refinancing a commercial property?
[{"id": "ds3ifsc", "text": "Repatriation of equity.", "replies": [], "depth": 1}, {"id": "ds3iw9h", "text": "The benefits of refinancing commercial properties (especially through the agencies Freddie and Fannie) are potentially endless. Say you have a multi-family and have traditional bank debt on it. Refinancing through Freddie will allow you to get set up on a longer amortization, have an assumable mortgage, be non-recourse, and potentially cash out the existing debt thus putting money in your account to either put back in the building or use for another project. Obviously, this is a best case example. But with the way the interest rates are running right now, locking in best in class permanent debt through the government backed programs can be extremely beneficial. Even refinancing an existing agency loan could be beneficial if you have put enough equity in the project, can get it reappraised at a higher value, and therefore get a cash out refinance. Alternatively, you can refinance for better rates and terms with your institution or the agencies without cashing out. Depending on the current note, this could be a great move in the current capital markets environment. \nI work for a firm that specializes in refinancing commercial real estate assets. If you have any questions on the above or any additional questions, please do not hesitate to direct message me.\nHope this helps.  ", "replies": [{"id": "ds3kzh3", "text": "Owner is responsible to pay taxes on capital gains from a refi, on the equity they \"pull out\" right? So wouldn't it make more sense to get a second loan on the asset to pay for a large capital expenditure vs. paying for it with equity pulled out through a refi? ", "replies": [{"id": "ds3ninw", "text": "Hmm.. I think that capital gains is based on the purchase price. In your example the cash flow would be from a loan, not from a sale.", "replies": [{"id": "ds3oeop", "text": "Right. That makes sense. ", "replies": [], "depth": 4}, {"id": "ds3pepi", "text": "I'm not a CPA, but you don't have to pay tax on the proceeds from a loan. That isn't money you 'made' its money you borrowed. ", "replies": [], "depth": 4}, {"id": "ds3pl23", "text": "Exactly. There is also the ability to put the money in a 1031 exchange account that does not get taxed and can only be used to purchase more properties. Good for building ones portfolio. ", "replies": [], "depth": 4}], "depth": 3}, {"id": "ds3zjgg", "text": "No. Only on a sale of a property.", "replies": [], "depth": 3}, {"id": "ds46hw8", "text": "A refinance is not a taxable event. Your basis is what matters when selling and calculating gains, financing does not play into basis.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ds43zvx", "text": "Pull out the cash and re-invest somewhere else !!!", "replies": [], "depth": 1}, {"id": "ds4mo8u", "text": "Lower the cost of capital or pull out capital for reinvestment or expenditure. ", "replies": [], "depth": 1}]