Shafiq Hirani CCIM tells building owners to refinance loans maturing in the next 6-12 months at 5% interest, not the 4% many expected. Lenders focus on debt service coverage ratio, which improves only by raising net operating income. Each $20,000 in additional NOI adds roughly $330,000 in building value.
What this means for you, the owner of a small or midsize building: if you have a loan maturing in the next 6 to 12 months, plan around a 5% handle on your borrowing cost, not the 4% you may have penciled in last year. That gap can be the difference between a refinance that works and one that doesn't. And here is the part that does not change no matter what the Fed does Wednesday: your debt service coverage ratio is what determines your loan. When rates are near 5%, lenders need your income to cover the payment with room to spare. The only lever that moves that is your NOI. Rebid your insurance, appeal your assessment, recover the utility costs you are absorbing. Every $20,000 of recovered NOI is worth over $330,000 in building value at a 6% cap, and it directly strengthens the coverage ratio a lender will scrutinize at 5%. You cannot control the 10-year. You cannot control the Fed. You can control the number that sits between them and your building, your NOI. Apartment owners, are you underwriting new deals or refinances at a 5% cost of debt yet, or still hoping for lower?
