Securing a bridge loan for a cash-out refinance can be challenging, especially for investors facing liquidity issues. In this case study, we’ll explore how we helped a client obtain a small-balance commercial loan for a cash-out refinance on his 8-unit multifamily property in Tampa, Florida, despite previous rejections from other lenders.
Overcoming Challenges with a Flexible Lender
Our client had been turned down by several lenders due to liquidity issues. However, we managed to find a small-balance commercial lender who was not only willing to approve the loan but also proved to be very flexible and accommodating.
One of the key benefits offered by this lender was their willingness to accept the existing appraisal conducted on behalf of the previous lender.
By reviewing the cost approach, sales comparison approach, and income approach in the appraisal, the lender accepted the valuations despite the fact that the appraisal was conducted in February 2020, prior to the COVID-19 pandemic.
This saved our client thousands of dollars in appraisal fees.
Unlocking Equity with a Bridge Loan
The small-balance commercial loan we found for our client was a short-term bridge loan program. This enabled our client to quickly leverage his cash position in his 8-unit apartment complex. With the cash-out proceeds, he plans to invest in other real estate projects. The terms of his commercial loan include a 2-year term, 65% loan-to-value, fixed interest rate, and no prepayment penalty.
One of the most significant benefits of many bridge loans is the absence of a prepayment penalty. This will allow our client to refinance into a longer-term program as soon as the market conditions are favorable.
The Advantages of Small-Balance Commercial Loans
Small-balance commercial loans offer several benefits to borrowers and investors looking to finance their real estate projects. Some of the key advantages include:
- Speed: Small balance loans typically have a faster approval and closing process compared to larger commercial loans. This allows borrowers to quickly access funds for their projects.
- Flexibility: Small-balance lenders are often more flexible in their underwriting guidelines, providing opportunities for borrowers who may not qualify for traditional commercial loans.
- Lower Costs: As demonstrated in our client’s case, small-balance loans can sometimes result in lower costs, such as reduced appraisal fees or other savings in the loan process.
- Customized Solutions: Small-balance loans can be tailored to the specific needs of the borrower, providing more personalized financing solutions that cater to individual investment strategies and goals.
Another popular option for multifamily loans is a DSCR loan, which does not require any tax returns.
A Successful Outcome for a Tampa Multifamily Property Owner
By partnering with a flexible lender and leveraging the advantages of small-balance commercial loans, we were able to secure a cash-out refinance for our client’s 8-unit multifamily property in Tampa. This allowed him to access the equity in his property and invest in additional opportunities.
