Multifamily Cash-Out Refinance Underwriting

A multifamily cash-out refinance replaces your existing loan with a larger one sized against the property's higher stabilized value, returning the difference as cash. You size it by capitalizing stabilized NOI at a market cap rate, applying the lender's LTV to get the new loan, then subtracting the old loan balance to find the proceeds.

The refinance is how a value-add business plan converts paper appreciation into returned capital. After you have raised NOI through renewals and renovations, the property reappraises higher; a new loan at the same LTV is therefore larger in dollar terms, and the spread above your existing balance comes back to you tax-deferred — without selling the asset.

The constraint that governs everything is debt-service coverage. LTV sets a ceiling on loan size, but the lender will also test that the new, larger payment is still covered by NOI. If the DSCR at the new debt level falls below the lender's threshold, proceeds are capped by coverage, not by LTV — so always re-run the coverage test before crediting yourself the full cash-out figure.

Worked example — sizing the cash-out

New loan = $11,666,667 × 70% = $8,166,667; cash out = $8,166,667 − $6,000,000 = $2,166,667 (pre-costs).

The discipline: size proceeds from value and LTV, but confirm the new DSCR still holds — coverage, not LTV, is the real cap on cash out.

The refinance is the payoff at the end of a value-add plan: you stabilized NOI by rolling rents to market, and now you monetize the appraisal. Stress the new payment against your DSCR before committing, and use the DSCR calculator to confirm coverage holds at the larger loan balance.