If you bought a Houston apartment building or retail center a few years ago and raised the income, the equity is real. The question is how much of it the current NOI can support after today's tax and insurance bills.
In short: LendingStreet offers commercial cash-out refinance loans in Houston on stabilized, cash-flow-positive property, including 9+ unit apartments, mixed-use, retail, office and flex. The new loan is sized on NOI, DSCR and appraised value, and the cash can go toward your next acquisition, capital work or other business purposes. Terms are custom, and maximum leverage varies by property type and balance.
A cash-out refinance fits a property that is already stabilized: steady occupancy, signed leases and at least a year of operating history showing the improved income. Typical Houston examples are a renovated garden complex in Spring Branch, a leased-up mixed-use building in the Heights or a fully leased strip center in the suburbs.
If the property is still in lease-up or renovation, a bridge loan or waiting until the income seasons is usually the better choice.
Timing matters too. Many investors wait until a full year of improved income shows in the trailing statement, because underwriting gives more weight to collected rent than to new leases that have not paid for long. Refinancing a few months too early can mean a smaller loan.
Underwriting starts with stabilized NOI, using the trailing operating statement and current rent roll. The new loan is the lower of the leverage limit on the appraised value and the amount NOI supports at the program's DSCR minimum. Cash-out leverage is often lower than on a purchase.
The cash you receive is the new loan, less the existing payoff and closing costs. If the DSCR test binds, a higher appraisal will not increase the cash.
Some owners also look at a rate-and-term refinance with little or no cash out, which can be the better choice when the property's NOI only modestly supports a larger loan. The team can show both options side by side so you can see the trade-off between cash in hand and monthly coverage.
| Test | What it uses | Houston note |
|---|---|---|
| Leverage | Appraised value | Non-disclosure state; comparable sales are harder to verify |
| Coverage | Stabilized NOI and estimated annual debt service | Taxes and insurance often reduce NOI at refinance |
| Seasoning | Trailing operating history | Improved rents need to show in the numbers |
This example is illustrative and not a quote. An investor owns a renovated 20-unit building with average rent of $1,350 a month, $324,000 a year at full occupancy. Underwriting assumes 7% vacancy and collection loss, leaving $301,320. Assumed operating expenses, including updated taxes and insurance, are $131,320, so NOI is $170,000.
The appraisal assumption is $2,350,000. At 65% LTV the new loan is $1,527,500, with estimated annual debt service of about $135,457 on a 25-year amortization, a DSCR of about 1.25x. After paying off the existing $900,000 loan, the investor receives $627,500 before closing costs.
| Item | Amount |
|---|---|
| Gross potential rent | $324,000 |
| Vacancy and collection loss (7% assumption) | -$22,680 |
| Operating expenses (assumption) | -$131,320 |
| NOI | $170,000 |
| Appraised value (assumption) | $2,350,000 |
| New loan at 65% LTV | $1,527,500 |
| Estimated annual debt service | $135,457 |
| DSCR | About 1.25x |
| Existing loan payoff | -$900,000 |
| Cash out before closing costs | $627,500 |
Houston owners often find that expenses have risen since they bought. Insurance premiums and deductibles have gone up after recent storms, and property taxes reflect higher appraised values. Underwriting uses current numbers, not the figures from your original purchase.
Owners can protest the Harris Central Appraisal District value each year, and a successful protest lowers the tax line. Shop insurance before you apply, since a better quote can raise NOI and the loan amount.
Investors commonly use cash-out proceeds to buy another property, fund capital improvements, build reserves or pay off higher-cost short-term debt on another investment. Proceeds must be used for business purposes.
Before you decide how much to take, look at what the higher payment does to your cushion. A building that clears the minimum DSCR today could fall below it if insurance jumps again at renewal, a large tenant leaves or the appraisal district raises the value. Leaving some equity in the property and keeping reserves on hand gives you room to absorb a bad year without stress.
For portfolio investors, a cash-out on one stabilized Houston property is a common way to fund the down payment and renovation reserves on the next value-add deal, then repeat the cycle once that property stabilizes.
If your property has one to eight residential units, it is a residential cash-out refinance, handled under our DSCR programs with different limits. Texas also has special cash-out rules for homesteads, which do not apply to non-owner-occupied investment property.
Texas does not require sale prices to be disclosed, so appraisers rely on their own data, broader research and income approaches. Signed leases, a clean rent roll and a strong operating history help support value. Expect the appraiser to look closely at the income approach on Houston commercial property.
If you have sold or bought nearby property, or hold signed leases on comparable buildings, share that information with the appraiser. Supporting data helps when public sale records are not available.
A commercial cash-out refinance takes longer than a residential refinance, with a full appraisal, lease review, environmental report and property-condition review. Have these ready:
Our investor loans are business-purpose loans on non-owner-occupied property. Use the form below or call (877) 298-1001 with the address, current loan balance, rent roll and operating statement. The team will size the new loan on NOI and DSCR and show what cash it leaves you.
Yes, on 9+ unit buildings that are stabilized and cash-flow positive. One to eight unit buildings use our residential DSCR cash-out programs.
It depends on the lower of the leverage limit on appraised value and the DSCR test on NOI, less your existing payoff and closing costs. Cash-out leverage is often lower than on a purchase.
Usually because taxes and insurance have risen, which lowers NOI and the loan amount the income supports.
Yes. Cash-out loans require stabilized income and a history showing it. Properties still in lease-up often fit a bridge loan instead.
It can. A lower tax bill raises NOI, which can raise the loan the property supports.
Business purposes, such as buying another property, capital improvements or reserves.
Usually several weeks, because of the appraisal, lease review, environmental and property-condition work. A complete package shortens it.
Often, yes. Underwriting gives more weight to collected income in the trailing statement, so a longer history of the improved rents usually supports a larger loan.
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