You raised rents, cut expenses and the building is worth more than you paid. A cash-out refinance turns that higher value into cash you can use for the next deal.
In short: An apartment cash-out refinance replaces your current loan with a larger one and pays you the difference. On 5+ unit buildings, the new loan is limited by two tests: a percentage of appraised value and a minimum coverage ratio of NOI to debt service. Whichever test produces the smaller loan sets your cash-out. LendingStreet finances multifamily cash-out refinances on investment property in all 50 states.
Appraisers value apartment buildings mostly on income. They take net operating income and divide it by a market cap rate. Comparable sales back up that number.
That is why operating improvements matter so much. Every dollar of NOI you add can raise value by many dollars, depending on the local cap rate.
The first limit is leverage. Programs cap cash-out loans at a share of appraised value, and cash-out leverage is usually lower than purchase leverage.
The second limit is coverage. The new loan’s annual payment has to fit inside the building’s NOI with room to spare. On a building with modest rents and high value, coverage is often the tighter limit.
This example is illustrative. An investor bought a 10-unit building for $1.1 million several years ago and still owes $780,000. Rents are up, and NOI is now $110,000.
The appraisal comes in at $1.45 million. At an illustrative 75% leverage, the new loan is $1,087,500. At an illustrative 7.0% rate on 30-year amortization, debt service is about $86,822 a year, for coverage of about 1.27x.
| Item | Amount |
|---|---|
| Appraised value | $1,450,000 |
| New loan at 75% | $1,087,500 |
| Pay off existing loan | −$780,000 |
| Estimated closing costs | −$30,000 |
| Estimated cash to investor | ≈$277,500 |
Most programs want you to own the building for a period before they will lend on a new, higher value. That window varies, commonly around 6–12 months.
If you refinance sooner, some programs will base the loan on your purchase price plus documented improvements instead. Keep receipts and invoices for every capital project.
Not every refinance needs to take cash out. A rate-and-term refinance pays off the existing loan and closing costs only. It often carries better pricing and can use slightly higher leverage.
If your main goal is to replace a maturing loan or move from short-term debt to a long-term fixed loan, rate-and-term may be the better fit. If you need capital for the next acquisition, cash-out is the tool.
Investors commonly use apartment cash-out for a down payment on the next building, for capital improvements or to buy out a partner. Because these are business-purpose loans, the funds should support the investment business.
Keep reserves in mind. Pulling the maximum leaves the building with a higher payment, so plan for vacancy and repairs before you spend every dollar.
Send your trailing 12-month operating statement, current rent roll and payoff letter. Your loan officer will estimate value and test both limits before you order an appraisal.
Our financing team typically brings back 2–3 options, showing cash to you, the new payment and prepayment terms for each.
It depends on appraised value, NOI and the program’s leverage and coverage limits. Cash-out leverage is typically lower than purchase leverage. The lower of the two tests sets your maximum loan.
Seasoning varies by program, commonly around 6–12 months. Some programs allow earlier refinances based on purchase price plus documented improvements. Your loan officer can confirm what applies to your timeline.
Loan proceeds are generally not treated as income because you must repay them. Tax treatment depends on your situation. Talk to your tax advisor before you close.
A low appraisal reduces the leverage test, which lowers your cash-out. You can take the smaller loan, challenge the appraisal with better comparables or wait until NOI improves further. Many investors refinance in stages.
Yes. Our multifamily programs are business-purpose loans and LLC ownership is standard. You provide entity documents along with the property file.
Yes, some bridge programs allow cash-out on stabilized or nearly stabilized buildings. Bridge cash-out is short-term, so you need a clear plan to refinance into permanent debt. It suits investors who expect NOI to rise soon.
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Properties with 5+ units are commercial by definition, so they fall outside Fannie/Freddie residential programs. But at 5-20 units the loan is usually too small for institutional multifamily desks, whose minimums and timelines are built for 50+ unit assets. The result is a financing gap: too big for residential, too small for institutional.
Through DSCR-based and bridge capital sources that underwrite to the property's net operating income rather than agency checklists. Typical structures: purchase or refinance at up to 75% LTV, 5-20 units, $200K-$20M, with bridge-to-perm available for value-add and lease-up plays.
Stabilized small multifamily DSCR loans typically close in 14-21 days. Bridge structures for value-add acquisitions can close in 5-10 days, then refinance into permanent DSCR financing after stabilization.
No. These programs underwrite the property's income (NOI / DSCR), not your tax returns. LLC borrowers are standard, and there is no W2 requirement.
Mixed-use with a residential majority (for example, apartments over retail) can be placed through commercial and mixed-use capital sources through the same LendingStreet application, with custom terms up to $5M+.