Refinance versus Sell Analysis - Decision-making process
for anyone of you who have personally been through the crossroads of selling versus refinancing an asset, what was your thought process behind the different factors of the decision?
How did you model this out and come to the conclusion which made more sense? whether from a institutional standpoint or an evergreen fund, anything to consider when thinking about both options? ideally refinancing is tax free, and if you have no pressure of selling from investors, id assume refinance would be the superior option
thoughts?
With a 1031 exchange mitigates the tax issue.
As a scenario I was with a company, and we were looking to raise equity, we had 3 properties that due to our new 3-year business plan were not really a part of that plan. We did an analysis and decided selling those assets and using the proceeds to purchase properties more in line with our business plan.
CRE, just as with any investment, is all about whether the equity you have in your project is commanding maximum yield (balanced with risk of course). If a new project or acquisition provides a better risk/return profile than what you currently have your money sunk in to, then refi/sell as needed to get your capital out to move to another project(s).
Just make sure whatever analysis you do takes into account the costs associated with moving those funds as well as the tax implications of the method you use to extract your capital.
thanks?
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