The $500K Question Every Multifamily Owner Faces 

You’re staring at your apartment building’s financials, and the question hits you again: Should I refinance or sell? 

Maybe your loan’s coming due. Perhaps you’ve seen property values climb and you’re wondering if it’s time to cash out. Or maybe you’re just looking at your return and thinking there’s got to be a better play here. 

Here’s the thing: refinance vs sell apartment building decisions aren’t just about running numbers. They’re about timing, market conditions, your personal goals, and frankly, what keeps you up at night. Get it right, and you could unlock hundreds of thousands in equity or position yourself for long-term wealth. Get it wrong? You might leave serious money on the table or worse, get stuck in a property that’s draining your resources. 

In 2025, this decision carries extra weight. Interest rates are stabilizing but still elevated. Cap rates are shifting. And the multifamily market is at a crossroads that could define the next decade of real estate investing. 

Let’s cut through the noise and build you a framework that actually works. 

Why This Decision Matters More in 2025 

The multifamily landscape has transformed dramatically since 2020. If you bought or refinanced during the ultra-low rate era, you’re probably sitting on a sub-4% mortgage. Now? We’re looking at rates in the 5-7% range for most commercial multifamily loans. 

But here’s where it gets interesting. Property values have appreciated in many markets, even as financing costs have climbed. This creates a unique tension: you might have significant equity, but accessing it through a multifamily refinance 2025 could mean a much higher payment. 

The market fundamentals tell a compelling story. According to recent industry reports, multifamily demand remains strong in most metros with continued undersupply in many regions. Rental rates have grown, though at a slower pace than 2021-2022. This means your Net Operating Income (NOI) is likely healthier than it was a few years ago. 

So why does this decision feel harder than ever? Because you’re not just choosing between two options, you’re betting on where the market goes next. 

Understanding Your Two Paths Forward 

Path 1: The Refinance Route 

When you refinance your apartment building, you’re essentially replacing your existing loan with a new one. The goals typically include: 

• Pulling out equity for other investments or expenses 
• Improving loan terms (though less common in today’s rate environment) 
• Extending your hold period to capture more cash flow and appreciation 
• Consolidating debt across multiple properties 

Path 2: The Sale Exit 

Selling means you’re converting your ownership into cash. The objectives here usually involve: 

• Crystallizing gains from appreciation 
• Redeploying capital into better opportunities 
• Reducing management burden and stress 
• Diversifying your investment portfolio 
• Taking chips off the table before a potential market correction 

Neither path is inherently better. The right choice depends on your specific situation, and that’s exactly what we’re going to unpack. 

The Real Costs: Refinancing Deep Dive 

Let’s talk dollars and cents. A multifamily refinance isn’t free, and understanding the true cost is essential to making a smart hold or sell multifamily decision. 

Upfront Costs of Refinancing 

Expect to pay 2-4% of your loan amount in closing costs. On a $2 million loan, that’s $40,000-$80,000 out of pocket. This typically includes: 

• Appraisal fees ($3,000-$10,000) 
• Environmental reports ($2,000-$5,000) 
• Legal fees ($3,000-$7,000) 
• Lender fees (1-2% of loan amount) 
• Title insurance and miscellaneous costs 

The Interest Rate Reality 

If you’re refinancing from a 3.5% rate to a 6.5% rate on that same $2 million loan, your monthly payment jumps from roughly $8,985 to $12,659 an extra $3,674 per month or $44,088 annually. 

That’s real money coming out of your cash flow. Will your NOI growth cover it? 

Tax Implications to Consider 

The good news: pulling cash out via refinancing isn’t a taxable event. You’re borrowing against your equity, not selling it. This is a massive advantage over selling, where you’ll face capital gains taxes (more on that shortly). 

The Sale Alternative: What You’re Really Getting 

Selling your apartment building means liquidity—but it also means taxes, transaction costs, and saying goodbye to ongoing cash flow. 

The True Cost of Selling 

Plan on spending 6-10% of your sale price on transaction costs: 

• Broker commissions: 2-6% (typically 4-6% for multifamily) 
• Closing costs: 1-2% 
• Capital gains tax: This is the big one 

If you’ve held the property for more than a year, you’ll pay long-term capital gains rates (0%, 15%, or 20% depending on your income) plus depreciation recapture at 25%. On a property where you’ve made $500,000, you could easily pay $125,000-$150,000 in federal taxes alone. 

But You Get Freedom 

The flip side? You have cash. Real, spendable money that you can: 

• Invest in properties with better fundamentals 
• Diversify into other asset classes 
• Pay down high-interest debt 
• Build reserves for the next market opportunity 

Sometimes, the best investment is the one you haven’t made yet. 

Decision Framework: 7 Critical Questions to Ask 

Ready to make your refinance vs sell apartment building decision? Work through these questions honestly: 

1. What’s Your Current Loan Situation?

If you have a low fixed-rate loan with years remaining, refinancing might destroy your best asset cheap, long-term financing. If you’re facing a balloon payment or floating rate that’s crushing cash flow, refinancing or selling might be necessary. 

2. How’s Your Property Performing?

Look at your NOI trend over the past 3 years. Is it growing? Stagnant? Declining? A property with strong NOI growth (5%+ annually) can justify holding and refinancing despite higher rates. A property with flat or negative NOI growth is a candidate for sale. 

3. What’s Your Local Market Doing?

This matters enormously. Check these indicators: 

• • Population growth trends 
  • Employment diversification 
  • New construction pipeline 
  • Rental rate trajectory 

Strong markets suggest holding makes sense. Weakening fundamentals point toward selling. 

4. What Are Your Personal Goals?

Be honest. Do you want to be a landlord in 5 years? Are you nearing retirement? Do you need the mental bandwidth that managing properties consumes? Your lifestyle matters as much as your spreadsheet. 

5. Can You Handle the New Payment?

If refinancing bumps your payment by $3,000/month, do your reserves and cash flow support that? Will you be stressed every month, or is it comfortable? 

6. What’s Your Opportunity Cost?

If you sold and netted $800,000 after taxes, what could you do with that money? Could you buy two smaller properties with better cash-on-cash returns? Invest in a development deal? Sometimes the best move is into a better opportunity. 

7. What’s Your Risk Tolerance?

Holding is betting on continued appreciation and stable operations. Selling is taking risk off the table. Where’s your head—and your stomach—on risk right now? 

When Refinancing Makes Perfect Sense 

Pull the trigger on a multifamily refinance 2025 strategy when: 

You’ve got a maturing loan and your property fundamentals are strong. You’re not choosing to refinance; you’re choosing to hold by refinancing. 

Your NOI has grown significantly since your last financing. If your NOI is up 20-30%, you can likely pull out equity while maintaining similar or better debt service coverage ratios. 

You see clear appreciation ahead. Maybe there’s new infrastructure coming, Amazon just announced a distribution center, or your submarket is gentrifying. Hold and capture that upside. 

Your current rate is already market-rate. If you’re not giving up a low rate, the calculus shifts heavily toward refinancing for those wanting to maintain ownership. 

You want to pull equity tax-free for other investments while keeping your cash flow machine humming. 

Example Scenario: You bought a 24-unit building in 2019 for $2.4M with a $1.8M loan at 4.5%. It’s now worth $3.2M and NOI has grown from $175K to $235K. You can refinance at 70% LTV ($2.24M loan), pull out more than $440K cash tax-free, and your debt service coverage ratio actually improves despite the higher rate. That’s a clear refinance situation.


When Selling Is Your Best Play 

Consider listing your property when: 

You’re sitting on massive appreciation and your market is showing signs of peaking. Cap rates expanding in your area? Absorption rates slowing? It might be time. 

Your property needs major capital expenditure (new roof, HVAC replacement, major renovations) that you don’t want to fund. 

You can’t refinance profitably. If the new payment would devastate your cash flow and you need access to equity, selling might be your only reasonable option. 

Better opportunities exist. You’ve identified properties or markets with superior fundamentals and risk-adjusted returns. 

You’re ready to exit the landlord game. Life’s too short to manage properties you hate. Sell and move on. 

Market conditions are exceptional. Buyer demand is high, cap rates are compressed, and you’re getting offers above your expectations. Sometimes you get lucky—take it. 

Example Scenario: You own a 30-unit building in a tertiary market. It’s appreciated nicely, but three new large apartment complexes are delivering next year, population growth is slowing, and your major employer just announced downsizing. You refinanced 18 months ago at a decent rate, but you can sell at a 5.2% cap rate while the market is still hot. That’s probably a sell.


What’s Coming: Multifamily Outlook for 2025-2026 

Let’s gaze into the crystal ball (knowing it’s always cloudy). 

Interest rates will likely remain elevated but relatively stable through 2025. The Fed has signaled they’re done with aggressive hikes, but don’t expect a return to 3% loans anytime soon. 

Multifamily fundamentals remain generally healthy. We’re still underbuilt in most markets relative to household formation. This supports continued, modest rent growth. 

Cap rates have expanded from their 2021-2022 lows but are stabilizing. This means property values have found a floor in many markets, but explosive appreciation is unlikely. 

The opportunity: Properties bought or refinanced in 2020-2021 at peak values and low rates might struggle. But well-located properties with strong fundamentals should continue performing. The next 24 months will likely separate the smart operators from the lucky ones. 

For owners making the hold or sell multifamily decision: If your property has strong bones, good location, and you can manage higher financing costs, holding positions you well for the next cycle. If you’re in a weaker market or can’t stomach reduced cash flow, selling into still-decent demand makes sense.

Take Action: Your Next Steps 

The refinance vs sell apartment building question doesn’t have a universal answer. But you now have a framework to make the right decision for your situation. 

Here’s what to do today: 

Step 1: Pull your property financials. Calculate your current NOI, look at your trend line, and project where you’ll be in 12-24 months. 

Step 2: Get quotes. Call 2-3 commercial mortgage brokers and get real refinancing terms. Call 2-3 commercial brokers and get a realistic market value and probable sale price. 

Step 3: Run the numbers. Model both scenarios honestly. What’s your cash-on-cash return if you refinance? What’s your after-tax net if you sell? What could you earn with that capital elsewhere? 

Step 4: Check your gut. After the spreadsheets are done, what does your instinct say? Sometimes your subconscious knows things your rational mind hasn’t fully processed. 

Step 5: Make the call. Indecision is the most expensive option. Choose your path and execute with confidence. 

The multifamily market rewards decisive action based on solid analysis. You’ve got the framework. Now it’s time to use it. 

What’s your move going to be?