Multifamily Commercial Cash-Out Refinanace Question
Hello,

So I purchased a 6-unit in January with the intent of BRRRRing it. Finally finished the rehab and got the units up to market rents.

Many of the new leases are 1-2 months old, is that going to be a problem when I refi?

**Would the bank be concerned that most leases are only a few months old?**

Also, this means that the NOI has jumped pretty significantly in the past few months.

**Do lenders use new NOI or will they look at historicals?**

New to commercial lending and looking to rely on the expertise of this subreddit.

I will be calling loan officers tomorrow for specific answers but I wanted to know what I should expect.
[{"id": "il7xpxf", "text": "Typically the lender will want to see the income be stable for a period of time of 6 months or more.", "replies": [], "depth": 1}, {"id": "il826x7", "text": "Commercial lending standards can vary widely from institution to institution.  My current borrowing relationship is with the largest commercial lender in my state.  They can make things happen that other banks can't/won't. \n\nIMO you should talk with a smaller local 1-3 branch bank and also the largest commercial lender in your area to compare what they can offer you.  Good luck!", "replies": [{"id": "il92cza", "text": "This is the best advice.  Some lenders only care about leasing in place others will want to know historical occupancy.  It also depends on your desires leverage level and where the property appraises at.", "replies": [], "depth": 2}], "depth": 1}, {"id": "il8b4vj", "text": "If they\u2019re market rate leases and the market isnt rising too quickly, I would think you\u2019re ok. They use a combination of historical and T1, T3 if they need to underwrite you with a recent repositioning that hasn\u2019t seasoned too long. Should be ok.", "replies": [], "depth": 1}, {"id": "il8ko8n", "text": "6 units don't fit well into most lenders' boxes. They can't sell it on to fannie/freddie for an NPV fee like a 1-4 sfr and the juice isn't worth the squeeze for the big boys to originate &amp; service; so definitely find a smaller lending institution. \n\nA 6 unit is valued on an income approach rather than a sales comparison approach. The key to the BRRRR is getting a sufficiently high value to get the initial capital and improvements back (value x lending %). Your advance rates are going to be lower on a 6 unit than a single family, and you can't really up the appraised value by changing the set of comps the way you can on an SFR.\n\nYour bigger issues are the expense side. With no history, the appraiser &amp; lender are going to have to make assumptions about the expenses to get to an NOI.  Some things to consider &amp; have answers for:\n1) Are your units sub metered, or is it master metered? \n2) Are you in an area that experiences extreme weather events (hurricanes or blizzards) that would increase maintenance costs and what are your expectations for this expense?\n3) Is the property standard or unique (is it 6 townhouses or a turn of the century Victorian carved into 6 units)?\n4) What is your experience in real estate (first or 50th)?\n5) What do you look like as a guarantor on this loan?", "replies": [], "depth": 1}, {"id": "il918oz", "text": "This has to be satire.", "replies": [], "depth": 1}, {"id": "il98we9", "text": "Don\u2019t talk to any lenders. Let a broker structure it up for you. They will find a lender to make it happen for you. High chance you mess it up talking to them directly.", "replies": [], "depth": 1}, {"id": "ila0px5", "text": "Lenders also have seasoning periods in which they have a specified period of time you need to own the property before being able to refi. Can range from 6-12 months but it depends on the lender.", "replies": [], "depth": 1}, {"id": "ilcbbxe", "text": "In my experience, with small commercial properties (like yours); you want to find local credit unions and banks. Nationwide banks are not going to be interested in a 6 family. With that being said; these small local lenders have varying underwriting and requirements. They also have different loan programs. These lenders will be keeping these properties on their books so they are more likely to work with you instead of telling you a bunch of requirements and saying you need to fit into that box or they cannot work with you. They usually have a small, local credit committee that makes the final decision; where a large lender doesn't even know where the city is your property is located in.\n\nStart by contacting all local banks and credit unions within a 45-60 minute drive of the property and start asking them if they are interested in your property type; then start building a relationship(s). See what offers they have available etc.", "replies": [], "depth": 1}, {"id": "ilh062v", "text": "NOI is just one facet lenders will look at to analyze the property and deal structure. As a CRE Mortgage Broker we would underwrite it looking at LTV, LTC and Debt Coverage Constraints (Debt Yield for certain situations/lenders). Depending on how much you have recently invested in the rehab &amp; proceeds you are looking for you; may be Loan-To-Cost constrained given the valuation and income has possibly increased substantially more than the total cost spent in the property. Most lenders will take the lesser of these 3 variables to determine loan proceeds.\n\nLike other people have mentioned, on first glance this deal size is likely to be best with a local bank or credit union which is a great start in inquiring how they will analyze the property. Or reach out to a reputable CRE Mortgage Broker.", "replies": [], "depth": 1}]