When a commercial loan matures, property owners face one of the most important financial decisions in real estate: should you refinance or sell? With interest rates, market dynamics, and property performance all in play, choosing the right path can have lasting impacts on your investment strategy.
1. Assess Your Property’s Performance
Before making any decision, evaluate how your property is performing:
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Occupancy Rates: Are your units consistently leased, or is there turnover risk?
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Cash Flow: Does rental income comfortably cover expenses and debt service?
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Recent Improvements: Updated systems, renovations, and energy efficiency upgrades can boost refinancing terms or market value.
2. Review Current Market Conditions
Market dynamics often dictate whether refinancing or selling makes more sense:
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Interest Rates: Lower rates make refinancing attractive; higher rates can reduce long-term returns.
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Buyer Demand: Strong investor interest may mean a favorable selling environment.
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Local Regulations: Policies like rent control or transfer taxes (e.g., Measure E in San Jose) can influence value and investor appetite.
3. Refinance if…
Refinancing allows you to hold the asset longer and potentially unlock equity. It may be the right move if:
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You believe the property will appreciate further.
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Cash flow is stable and sufficient for lender requirements.
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You want to extend your investment horizon or access capital for upgrades.
Benefits of Refinancing
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Preserve ownership and long-term appreciation.
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Potentially lower monthly payments with favorable terms.
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Opportunity to pull out equity for reinvestment.
4. Sell if…
Selling makes sense when the market is strong, or the property no longer aligns with your portfolio strategy:
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The asset has reached peak value.
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Managing the property is no longer desirable.
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Proceeds can be reinvested into higher-yield opportunities.
Benefits of Selling
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Lock in current market value.
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Free up capital for other investments.
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Reduce management and compliance burdens.
5. Work With a Local Commercial Real Estate Team
Whether you refinance or sell, the decision is rarely straightforward. Partnering with a local, experienced brokerage team ensures you have:
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Accurate Valuations: Understanding true market value is critical.
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Access to Lenders & Buyers: A strong network can make both refinancing and selling smoother.
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Market Insights: Local experts know the nuances—rent growth trends, investor appetite, and city regulations.
At The R&Z Group of Compass Commercial, we guide multifamily property owners through these pivotal decisions. Our team provides tailored strategies to help you maximize returns, whether that means refinancing for the future or selling at the right time.
Final Thoughts
When loans come due, the choice between refinancing and selling is about aligning your financial goals with market realities. By analyzing property performance, reviewing market conditions, and leveraging expert guidance, you can move forward with confidence.
Considering your options? Contact The R&Z Group today for a complimentary property valuation and strategy session.
