Why would an owner choose to not refinance?
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[{"id": "f9rjbok", "text": "Maybe they are expecting the property to appreciate more.", "replies": [], "depth": 1}, {"id": "f9rki3k", "text": "The GP gets a disposition few on the sale of an asset?\n Return equity to investors. \nThey want to do another reposition forced appreciation play without being over leveraged. They are doing a 1031 exchange.", "replies": [], "depth": 1}, {"id": "f9rlq9m", "text": "Maybe the place is a PITA to operate or manage?", "replies": [], "depth": 1}, {"id": "f9rrfbm", "text": "If you are looking for a higher return on your money it is better to sell and put all your equity into another project that will give higher returns. Or maybe you think the market is due for a correction.", "replies": [], "depth": 1}, {"id": "f9sbpd2", "text": "Depends on the cap rate of the asset being traded. Sometimes, the take out loan is small compared to the sale price because the NOI cannot satisfy DSCR for target refi amount. \n\nIn markets where multifamily sells for 4 caps, you generate a lot more cash by selling the asset than you do refinancing.", "replies": [], "depth": 1}, {"id": "f9sc0t7", "text": "There is an  advantage to economies of scale. For example look at the landscaping costs of a multi-family building. In the So-Cal market here, the average costs of landscaping a non-institutional property run around $1,000-$1,500 per year. If an 8-unit building runs $1,000 to landscape annually lets say a 16-unit building runs $1,500. So, with that in mind, two 8-Unit buildings will cost me $2,000 and a single 16-unit building would save me +/- $500 per year in landscaping costs. Applying that logic to the whole range of expenses you can see your expenses per unit diminishing as you scale up. Therefore, a 1031 from an 8-Unit to a 16-Unit allows you to benefit from the advantages of taking leverage in this low interest rate environment **and** the economies of scale. This strategy/thought process allows ownership groups to make a profit even when selling their buildings at a slight loss when only comparing acquisition and disposition pricing.", "replies": [], "depth": 1}, {"id": "f9sng4u", "text": "Likely driven by finite-lived ownership structure (closed end fund or JV) or general sell/hold analysis.", "replies": [], "depth": 1}, {"id": "f9sucgr", "text": "Assuming an ideal world where cash flow, inflation, taxes, expenses, etc., all act predictably and smoothly, you'll see the internal rate of return (IRR) on your invested funds increase as time goes by.\n\nHowever, there will be a time when the IRR levels off and will even slightly decrease the longer you hold on to the asset. That's the time you sell and use the proceeds to buy another asset with increasing IRR again until that IRR levels off, and so on, and so on.\n\nThat's how you maximize IRR in theory. Reality, of course, can change things drastically.", "replies": [], "depth": 1}, {"id": "f9t97bi", "text": "Investors typically follow an investing life cycle. Very risky and value add to stable and some management to no management/mailbox money. Also, investing is about putting your money to work. If it can work harder 100% in another project then it makes more sense to sell. If I have a strip center and rents are maxed then I can refinance and maintain cash flow with some cash out or I can either exchange in to a higher yield asset or reduce management and risk by exchanging in to a single tenant asset. If everything was priced perfectly then return would be inversely related to return and as goals change between risk and return the asset needs to change. Wealth growth vs. wealth protection. As time goes on things change. And other reasons.", "replies": [], "depth": 1}, {"id": "f9u2k3f", "text": "Under the circumstance that the property owner upgraded/renovated the property into it's full earning potential, then it would make sense to sell and buy (1031 exchange) something that is below market value/returns and renovate that and repeat. Roll everything over and have benefits of depreciation along the way to never pay taxes. While enjoying positive cash flow. OR - renovate to full earning potential to refinance: pull money out for another investment property.", "replies": [], "depth": 1}]