Every multifamily deal eventually reaches a decision point. Do you hold it, refinance it, or sell it? Most investors go with whatever feels right in the moment — usually selling when the market is hot, or holding on because they’re not sure what else to do.
The operators who build durable wealth make this decision deliberately, based on a clear set of criteria. Here’s how I think about it.
Hold and Refinance
My strong preference, and the preference of every serious long-term operator I’ve watched build real wealth, is to hold properties and refinance rather than sell. Here’s why.
When you sell, you realize a taxable event. You pay transaction costs on both sides. You lose the asset. You have to go find another one, underwrite it, raise capital, close on it, and start the value-add process over. That’s a lot of friction, and it’s transactional. You get paid once and then you’re back to zero.
When you refinance, you pull equity out of the property tax-free. The property keeps generating cash flow. The loan balance keeps paying down. Rents keep growing over time. And in five to ten years, you refinance again.
The goal is to hold forever and build legacy wealth. Refinancing every five to ten years is how you get liquidity without triggering taxes and without losing the asset.
The 90 for 90 Rule: When You’re Ready to Refinance
Before a lender will put long-term agency debt on your property, you need to demonstrate stability. The benchmark most lenders use is called the 90 for 90 rule: 90% collections on gross potential rents for the past 90 days.
Note that this is collections on gross potential rents, not just occupancy. Physical occupancy and economic occupancy are two different numbers, and lenders only care about the latter. A property can look full on paper and still fail this test. If you’re at 90% physical occupancy but only 70% of those tenants are actually paying rent, for example, your economic occupancy is well below the threshold. So just remember, getting bodies in units and getting rent in the bank are not the same thing.
What to Look for in Long-Term Financing
Not all loans are equal, and the terms you accept when you refinance have consequences that play out over years. Here’s what I prioritize.
Non-recourse. As your net worth grows, you want to grow the safety net that protects it. A non-recourse loan means that if something goes wrong — a major employer leaves the market, the economy turns, occupancy drops below debt service — the lender’s only remedy is to take the property back. They can’t come after you personally. There are carve-outs for fraud and gross negligence (called “bad boy carve-outs”), but for normal market risks, you’re protected. Get non-recourse whenever you can.
Fixed rate. A variable rate loan means you don’t know what your debt service is going to be next year. I’ve seen operators get crushed by variable rate loans when rates moved against them. Lock in a fixed rate and get predictability in your cost of capital.
Long amortization. I want a 30-year amortization schedule if I can get it. Yes, you can still pay the property off in 20 years if you want — just make extra payments. But I don’t want to be locked into a large mandatory payment every month. If the economy shifts and things get tight, a 30-year am gives you more breathing room than a 20 or 25-year.
Long term. I want a minimum of 7 to 10 years on the loan term, and ideally 10 to 15. The reason is simple: you need to be able to weather economic cycles. If you bought in 2006 with a five-year term, you had to refinance in 2011 — one of the worst lending environments in a generation. If you had a ten-year term, you refinanced in 2016, when values had fully recovered and the lending environment was favorable. Longer terms give you more options.
Watch the prepayment penalty. If you think there’s any chance you’ll sell or refinance before the term is up, understand what the prepayment penalty looks like. Step-down penalties are manageable. Yield maintenance, where the lender charges you for all the interest you would have paid for the remaining term, can be brutal and can kill a sale. Know what you’re signing before you sign it.
When to Sell Instead
I keep the good ones and sell the others. That’s the simple version of my decision framework. Here’s what “good” means in practice.
Asset class. I want B and A class properties. C and D class properties have more management intensity, higher turnover, more maintenance, more tenant issues, and lower quality tenant pools. The premium you get on rents doesn’t compensate for the operational friction. If it’s C or D, I’m wholesaling or selling it.
Location. Landlord-friendly states with job growth, population growth, and decent school districts. If the market is tenant-friendly from a legal standpoint or the fundamentals are weak, I’d rather cash out and redeploy.
Financing available. If a property can only support short-term or recourse financing, usually because it’s smaller, in a weaker market, or in rough condition, that adds risk I don’t want on a long-term hold. I’m looking for properties where I can get long-term, non-recourse, fixed-rate agency debt when I refinance.
Rehab scope. If the renovation needed is so extensive that it would tie up my team for two years, I’m probably not the right long-term owner. I’d rather wholesale it to someone whose business model fits that project.
How to Asset Manage What You Hold
The mistake operators make once a property is stabilized is assuming they can go passive. You can automate a lot of things, like ACH rent collections, automatic mortgage payments, and monthly reporting. But you cannot set it and forget it.
Someone on your team should be walking the property once or twice a month. Not to micromanage the on-site staff, but to stay connected to what’s actually happening. Is there trash sitting somewhere it shouldn’t be? Is there a car in the lot that hasn’t moved in months? Is the landscaping being maintained? Those are signals. A property that looks cared for attracts tenants who care for it. A property that looks neglected attracts the opposite.
Your management team, whether in-house or third party, should be handling the full operational scope: rent collection, lease renewals and escalations, maintenance and repairs, tenant move-ins and move-outs, evictions, bookkeeping, and financial reporting. You should be able to ask for a financial report at any time and get an accurate one immediately. If that’s not happening, something is broken in your management structure.
On the asset management side, you’re monitoring the health of the deal and making proactive decisions. Are rents still at market, or have they drifted below while the market moved? Are expenses creeping up anywhere you can address? Is there an opportunity to add an amenity or a revenue stream that didn’t make sense a year ago but does now? Are you appealing property taxes after the most recent assessment? These are the questions that separate asset managers from passive owners.
The Long View
The operators I most respect in this business don’t think in terms of individual deals. They think in terms of portfolios that compound over decades. Good properties in good areas with good financing, managed in-house, held for a long time. Refinance when the equity is there. Pull capital out tax-free. Reinvest. Repeat.
That’s the model. And every decision about whether to hold, refinance, or sell should be filtered through the question: does this move serve that long-term picture, or does it just feel good right now?
Tracking NOI, collections, loan maturities, and property performance across a portfolio in real time is what Smart Management was built for — so you’re always making proactive decisions, not reactive ones. See how it works.
This post reflects my personal experience acquiring and exiting multifamily properties across the US. It is not legal or financial advice. Always consult qualified legal, financial, and tax professionals before making any exit decisions.