How to Buy Now, Raise Rents, and Refinance Later

In real estate investing, one of the most powerful strategies is to buy when you can, raise the income, and then refinance when the market turns. This “buy now, raise rents, refinance later” formula allows you to leverage value-add opportunities, lock in assets under current conditions, and position for future upside when interest rates drop or property values appreciate.

In this post, you’ll learn how this strategy works step-by-step, what you need to underwrite, the risks and rewards, and how it applies in high-cost markets like Los Angeles.

Step 1: Buying Under the Right Conditions

• Target properties where the purchase price already reflects current market weakness or seller motivation (e.g., oversupply, higher rates, weaker buyer demand).

• Use conservative underwriting: assume modest rent growth, use higher interest cost, include vacancy and cap-ex buffers.

• Factor in your renovation or value-add plan from the start — know how you will raise rents or improve NOI so you can justify the purchase price and financing.

• Structure debt so you understand your cash flow today, but also your refinance potential later (term, amortization, lock-in).

Step 2: Raising Income / Improving NOI

• Upgrade units, add amenities, improve management and expense control — every dollar of NOI improvement raises the asset’s intrinsic value.

• Consider adding ADUs (Accessory Dwelling Units) or converting under-utilized space, where local zoning allows.

• Benchmark local rents and occupancy; aim to move toward market or above-market rents over time.

• Use quality property management, reduce turnover, manage expenses, and maintain/reserve for cap-ex so your NOI is sustainable.

Step 3: Timing the Refinance (or Sell)

• Once your NOI has improved and the asset is stabilized (occupancy, rentals, expenses), you can refinance to capture value uplift — lower your interest rate, extend term, pull out equity, or adjust structure.

• Ideally you lock in a lower rate later (when markets improve) or a better LTV/DSCR profile that increases value and cash flow.

• Alternatively, you could sell after value-add and throughput to capture profit before refinancing.

• The key is flexibility: buy now with the idea of adding value and having options.

Risks and Considerations

• High borrowing cost today: you must block out higher interest expenses and understand your margins.

• Market risk: if rents stagnate or interest rates rise further, your refinance window may shrink.

• Liquidity risk: value-add projects require capital and reserves; bad surprises can erode returns.

• Timing risk: refinancing depends on cycle, credit environment, and interest rates — some things are out of your control.

• Execution risk: raising rents, upgrading units, managing tenants/expenses all require operational skill.

How This Applies in Los Angeles (Studio City & Nearby Area)

In high-cost, supply-constrained markets like these neighborhoods in Los Angeles, the “buy now, raise rents, refinance later” strategy holds extra potential:

• According to data, the Greater Los Angeles multifamily market in Q2 2025 reported a vacancy rate of 5.2% and rent growth of just 0.6% year-over-year, indicating a somewhat flat current market but underlying rental demand remains solid. (Matthews)

• With limited new supply and strong income demographics in neighborhoods like Burbank and Studio City, an investor who buys a small multifamily or duplex/triplex now and executes a rent-improvement plan is well-positioned for refinancing when the next up-cycle hits.

• For example, purchasing a four-unit building in Sherman Oaks with moderate renovation upside, increasing average rent by 10-15%, and then refinancing when cap rates tighten or rates drop could significantly boost returns.

• Because homebuyers are priced out in this area due to high prices, rental demand remains strong — enabling the income-improvement leg of the strategy to work.

• The local context: median home and rental costs are high, but this leads to higher potential NOI after upgrades if executed well, which supports the refinance payoff later.

Key Takeaways

• Buying now with a value-add mindset lets you capture opportunity when others are hesitant due to higher rates or weaker competition.

• Raising income (NOI) is the lever that makes refinancing a meaningful payoff — your value multiplies from the improved income, not just market cycles.

• Refinancing later gives you optionality: lower rates, extract equity, or reposition for long-term cash flow.

• In markets like Studio City, Burbank, Sherman Oaks, the combination of high baseline rents, constrained supply, and strong demographics amplifies this strategy — but you still need conservative underwriting and operational discipline.

Want to Learn More or Get Personalized Guidance?

If you’re serious about learning more about funding or real estate opportunities in Los Angeles, email us at vinay@chinnirealty.com or call/text (323) 996-3746 to schedule a conversation.

Recommended Reads

To deepen your knowledge, explore these related guides on our site:

• Why High Interest Rates Can Actually Be an Opportunity for Investors

• How to Calculate Your “Number” and Use Real Estate to Achieve It

• What Banks Look at When Lending for Commercial Properties
  
  

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