Why We Refinanced Two Properties in a High-Interest Rate Environment

Описание: Join Value Add Mike as he explains why he and his business partners decided to refinance two properties, even in a high-interest rate environment. Managing over $100 million in commercial real estate in the multifamily sector, they had several key reasons: equity, low leverage, and securing interest-only terms. Learn how they turned poorly run properties into valuable assets and recaptured all of their capital. Don’t forget to Like, Comment, Subscribe, and sign up for the newsletter in the description!

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Transcript:
Hey everyone value add Mike here today to discuss why we refinance on our two properties despite the high interest rate environment. For those who don't know, my name is Mike Taravella. value add, Mike and me and my business partners manage over $100 million in commercial real estate specifically in the multifamily sector. And we wanted to come on here to share why we refinance two of our properties. The first thing we wanted why we wanted to is because we had a lot of equity in the property. And that's because we bought the properties about two years ago, we added a lot of value to the property by renovating all the units, and getting market rent for those implementing other income in terms of moving fees instead of security deposits. And the properties were poorly ran from the previous owners. And so we came in, updated all the units make sure they were safe, secure, well kept very renovated to market. And we wanted to so we had a lot of equity on the table that we wanted to take out. So both deals we, we recaptured all of our capital back plus some. And so we're just very excited to get that capital back. The second reason why we wanted to do that we wanted to refinances because we wanted to get low leverage. And historically speaking with low interest rate, now six sub 6% may seem high, you know, two, three years ago, but historically, sub 6% interest rates is well below average in terms of the interest rate environment. So last three to three years or a little bit of anomaly with the global pandemic, the world shutting down and our economy shutting down. But we wanted to just lock in low interest rates for the next 10 plus years. And lastly, most importantly, is having a interest only for that entire term. So we're not paying principal pay down, which means that the low the mortgage that we have is already low levered, so it's very safe and secure. Because in downfalls high leverage deals are the ones that go under, hence the variable interest rate that had loan to cost loans. But we're locking in low term 50 or low leverage 55 to 60% loan to value and because of that work, our lenders giving us 10 years of interest only period so no principal pay down, which means as the rents continue to rise just being in really strong partner. Strong market fundamentals allow us to cashflow even after we refight all of our capital back. So that's why we refined our deals and really reassessing this across our entire portfolio because we want to make sure one we're stewards are investors capital to debt can be tricky and volatile. So we want to be as Top of Mind with our lenders, because they are the real number one investor in our deals. And we just want to make sure we continue to build the relationship because that, like I said, has been changing a lot. And so we want to make sure we have the freshest quotes when looking and reassessing refinances so it makes sure you're asking your operators if they're reassessing reifies there's a lot of different options but just making sure you're asking as a limited partner, and if this video got you any value, like comment, subscribe, share with a friend but most importantly, make sure you sign up for that newsletter in the description and until then we'll see you next time.