Cash-out refinance on a California 5-10 unit building
TL;DR: A cash-out refinance on a California 5- to 10-unit building is sized on the rents the building collects today and on a new appraisal. Lenders also look at how long you have owned it, the rent roll against the leases, and what the cash is for. We arrange and shop the refinance with wholesale lenders and only on non-owner-occupied buildings.
Quick answer
You can usually take cash out of a stabilized 5-10 unit building that you have owned for a while, as long as the in-place rents cover the new, larger payment plus taxes and insurance. Expect a fresh appraisal with an income approach, a current rent roll and leases, a trailing operating statement, and questions about recent renovations and the purpose of the cash.
What the refinance is sized on
A cash-out loan is larger than the loan it replaces, so the payment goes up. The lender checks that the building’s current rents still cover the new payment plus taxes, insurance and any association dues, and often runs a second test on net operating income. The appraisal sets value; the rent roll sets how much payment the building can carry. The loan ends up limited by whichever is tighter.
Because you already own the building, your property tax bill does not reset the way it does on a purchase, so taxes are usually the most predictable line in a refinance. Insurance can still change at renewal, so use the current premium and check the renewal date.
Seasoning, renovations and the value question
Lenders want to know how long you have owned the building. Some programs use the appraised value only after a minimum ownership period and otherwise cap the loan using your purchase price plus documented improvements. Rules vary by lender, so we check them before ordering an appraisal.
If you renovated units and raised rents on turnover, bring the receipts, permits and new leases. A clear story of what changed and when helps the appraiser and the underwriter support the new value.
California rent rules on a cash-out file
If you bought a building with below-market tenants, the rent roll may still include long-term tenancies with rents limited by the Tenant Protection Act or a local ordinance. That is fine, but those rents are what the lender counts. Units you re-leased at market after turnover help the numbers; units you hope to re-lease do not.
In cities with rent registration, have your registration current. Lenders may ask, and an unregistered building can raise questions about the rents you are allowed to collect.
Use of funds and business purpose
Every loan we arrange is business-purpose. Cash-out proceeds commonly go toward another investment property, capital improvements on this building or other business uses, and the lender may ask you to state the purpose in writing. Cash for personal, family or household purposes is outside what we arrange.
A seven-unit refinance where the payment, not the value, set the loan
If the lender’s minimum sits between the two results, the loan is cut back until the payment fits, even if the appraisal would support a larger amount.
Hypothetical worked example with made-up inputs to show the arithmetic. Not a quote, not an offer, and not a promise of terms. Pricing is set by the lender and is not shown on this site.
Who this fits, and who it does not
A good fit when
- A stabilized 5-10 unit building you have owned long enough to meet the lender’s seasoning rule.
- Rents in place that comfortably cover a larger payment.
- Cash going to another investment property or to improve this building.
- Documented renovations and new leases that support the value.
Not the right tool when
- Cash needed for personal or household use.
- You or a family member live in one of the units.
- The building is mostly vacant mid-renovation.
- Recent rent increases that are not yet backed by signed leases.
How the file moves
Send the current loan and rent roll
Mortgage statement, rent roll, leases, operating statement and what the cash is for.
Size check
We test how much payment the in-place rents carry and check seasoning rules before an appraisal is ordered.
Program comparison
We compare wholesale programs, including prepayment terms on the loan you have and the loan you are taking.
Appraisal, underwriting, funding
The lender appraises, underwrites and funds. Your old loan is paid off at closing.
Questions investors ask about this loan
How long do I need to own a 5-10 unit building before a cash-out refinance?
It depends on the lender. Some use the new appraised value after a minimum ownership period and otherwise limit the loan based on your purchase price plus documented improvements. We check each program’s rule before an appraisal is ordered.
Can I take cash out of my apartment building to buy another one?
Yes. That is a common business purpose, and the lender may ask you to confirm it in writing. Reserves are often sized with both properties in mind.
Does my existing loan’s prepayment penalty matter?
Yes. Many investor and commercial loans carry prepayment terms. Check your note before you start, because the cost of paying off the old loan comes out of your cash at closing.
Related reading
Send us the building, not just the borrower
Address, unit count, a current rent roll and the loan you have in mind. We read it the way a 5-10 unit underwriter will and tell you which wholesale programs are worth the appraisal.