Lease-rollover refinance test

How this calculation works

Method and assumptions

Forecast cash rent over one year with downtime and discounted reletting; subtract expenses. Capitalize that cash flow illustratively, size refinance debt, then deduct payoff, TI, commissions and refinance costs.

Worked example

From $800,000 annual rent, let $200,000 roll with six vacant months and a 10% reletting discount. Forecast-year rent becomes $690,000; adding $20,000 other income and deducting $300,000 expenses leaves $410,000 cash flow. At the default 7% debt rate, 30-year amortization, 1.25x DSCR, 70% LTV and 9% debt-yield tests, capacity is $4,108,406.86. The $3 million payoff, $100,000 TI, $30,000 commissions and $50,000 closing costs leave $928,406.86 surplus.

Before using the result

Know the boundaries

• Educational scenario, not a quote, commitment, approval, appraisal or payoff statement.
• Defaults and thresholds are editable illustrations; the executed documents and lender underwriting control.
• A simplified one-year stress, not a lease-by-lease appraisal. Expense changes, recoveries, free rent and stabilized lender adjustments need separate inputs or review.