Cash-out refinancing an LA apartment building: coverage, not value, sets the check.

How much cash can you take out of a Los Angeles apartment building with a refinance right now? For most stabilized buildings, less than the loan-to-value limit suggests, because debt service coverage is the test that binds. In the worked example below, a hypothetical $6.0MM building that supported about $2.10MM of cash out at the 5.40% rate on a loan we arranged in 2025 supports about $1.64MM at a rate consistent with a 5.31% 10-year Treasury. Same building, same rents, roughly $455,000 less.

Where things stand, as of October 7, 2026

• Long rates. The 10-year Treasury was 5.31% on October 5, its highest level since 2002 and up about 110 basis points since January. The 5-year was 5.06%.
• Short rates. The Fed raised its target range to 3.75% to 4.00% on September 16, its first increase since 2023.
• Apartment credit. Trepp's CMBS multifamily delinquency rate rose 35 basis points in September to 8.04%, the largest increase of any property type Trepp tracks.
• The agency box. Fannie Mae's Small Mortgage Loan program lends up to $9MM nationwide, with a maximum 80% LTV, a minimum 1.25x debt service coverage ratio and amortization up to 30 years.
• Rent stabilization. The City of Los Angeles RSO allowable increase is 3% from July 1, 2025 through June 30, 2027. Under the ordinance effective February 2, 2026, increases follow 90% of CPI with a 1% floor and a 4% ceiling, and the utility add-ons are gone.
• Transfer tax. For City of Los Angeles sales closing after June 30, 2026, Measure ULA is 4% above $5.4MM and 5.5% at $10.9MM or more, on the full price, on top of the city's 0.45% base tax.

Why coverage, not loan-to-value, caps your proceeds

Most permanent lenders run two tests and lends the lower result. The LTV test is a percentage of appraised value. The coverage test requires net operating income to be at least 1.20 to 1.25 times the annual loan payment. The coverage test moves directly with the interest rate; the LTV test moves only if the appraisal does.

To see which test binds, multiply the loan constant (the annual payment per dollar borrowed) by the required coverage. At 5.40% on a 30-year amortization, the constant is about 6.74%, and 6.74% times 1.25 is 8.42%. A building valued at a 5.5% capitalization rate can then carry a loan of 5.5 divided by 8.42, or about 65% of value. At 6.60%, the constant is about 7.66% and the hurdle is 9.58%. The same building now supports about 57% of value, and an 80% program maximum never comes into play.

The worked example: one building, two rates

Assumptions. Appraised value $6.0MM. Underwritten NOI $330,000, a 5.5% capitalization rate. Existing loan balance $1.8MM. The lender sizes at 1.25x on a 30-year amortization and caps cash-out leverage at 65% of value, or $3.9MM. Interest-only periods are not counted in sizing.

At 5.40%. $330,000 divided by 1.25 allows $264,000 of annual debt service. Divided by the 6.74% constant, that supports about $3.92MM, so the 65% LTV cap binds at $3.90MM. Cash out before closing costs and any prepayment premium: about $2.10MM.

At 6.60%. The same $264,000 divided by the 7.66% constant supports about $3.44MM, or 57% of value. Cash out: about $1.64MM. The annual payment is nearly the same in both cases. The loan is $455,000 smaller.

Where 6.60% comes from. Our bank permanent loans at 5.40% (August 2025) and 5.41% (September 2025) closed in months when the 10-year ran between 4.01% and 4.34%, a spread of roughly 105 to 140 basis points. Our six-unit Westside loan at 6.085% closed in July 2026, when the 10-year ran 4.48% to 4.75%, about 135 to 160 over. Adding 105 to 160 basis points to 5.31% gives roughly 6.4% to 6.9%. We used 6.60%. It is illustrative, not a quote.

Closing the gap. At 6.60% and 1.25x, each $10,000 of NOI supports about $104,000 of loan. Getting back to $3.9MM would take about $374,000 of NOI, 13% more income. A lender sizing at 1.20x would reach about $3.59MM. The other levers are in our guide to fixing low coverage.

Agency, bank, credit union or debt fund

Agency. Fannie Mae and Freddie Mac both run small balance programs. Fannie Mae's offers terms of 5 to 30 years, amortization up to 30 years and non-recourse execution with standard carve-outs. The trade is process and prepayment rigidity. Seasoning matters: under Fannie Mae's Multifamily Guide, if less than 12 months pass between acquisition and loan commitment, value is capped at the lower of the appraisal or the purchase price plus completed or escrowed qualifying improvements and acquisition costs up to 3% of the price.

Banks. Our bank permanent multifamily closings ran 5.40% to 6.085% when the 10-year was roughly 55 to 130 basis points lower than it is today. Expect higher pricing now. Banks offer flexibility the agencies cannot, including non-recourse at conservative leverage and negotiable prepayment.

Credit unions. They lend from their own balance sheets, and size is not the obstacle owners assume. We arranged a $22MM credit union refinance on a Miami Beach retail property.

Debt funds. For a building that does not clear permanent coverage yet, a fund will lend against the business plan at a higher rate. The fund loan we arranged on a Los Angeles apartment building at 1540 W Court St priced at 8.00%. A cash-out bridge only works if the plan raises NOI enough to refinance out at today's rates.

Rent-stabilized units: what lenders will count

The city's Rent Stabilization Ordinance generally covers rental properties first built on or before October 1, 1978. Rents may rise once every 12 months by the allowable percentage, 3% through June 30, 2027. Newer buildings may fall under California's AB 1482, which caps increases at 5% plus the change in the cost of living, or 10%, whichever is lower. It exempts housing issued a certificate of occupancy within the previous 15 years and runs until January 1, 2030.

Lenders underwrite in-place rents. A unit renting $900 below market, for example, counts at its current rent. The RSO lets rent reset to market when a tenant moves out voluntarily, but no lender sizes on turnover you expect. With RSO increases limited to 3% through June 2027 and 1% to 4% a year after that, NOI on an older LA building grows slowly, and the rate does most of the work. What protects proceeds: every legal increase taken and documented, and a rent roll that ties to deposits. Our owner's guide to LA apartment loans covers the package lenders read.

Refinance or sell: ULA and the loan you already have

Above the threshold, Measure ULA tilts the math toward refinancing. ULA is a tax on the sale of property, collected on the deed; a refinance with no change in ownership is not a sale. Sell our example building for $6.0MM and the city takes 4% of the full price, $240,000, plus the $27,000 base tax, before closing costs. A May 2026 report by the city's Chief Legislative Analyst summarized a UCLA Lewis Center study finding roughly a 50% decline in sales above the $5MM threshold, a finding others dispute. The statewide challenge that appeared headed for November will not reach voters.

Before you compare, read the prepayment clause on your current loan. A step-down premium is a set percentage of the balance that declines over time. Yield maintenance, in a standard Fannie Mae note schedule, is the greater of 1% of the amount prepaid or a formula based on the gap between your note rate and a Treasury yield over the remaining yield maintenance period. If your note rate is below the applicable Treasury yield, the formula produces nothing and you pay the floor. The same math makes a new yield maintenance loan expensive to exit if rates fall, which is the trade we weighed on our Durango Avenue closing.

What to do with the cash

Refinance proceeds are borrowed money, and borrowing is not a sale. A federal appeals court held in 1952 that mortgaging a property, even for more than its tax basis, is not a disposition, and that gain is realized when the property is finally disposed of. So the cash is generally not taxable income when you receive it. The borrowing does not raise your basis, though, unless the proceeds go into improvements to the property, so a later sale can produce a tax bill with less cash left to pay it.

Section 1031 does not apply. The IRS describes a like-kind exchange as an exchange of business or investment real property for other such property; a refinance is not one, and buying another building with the cash is a new purchase. How you spend the proceeds also decides how the interest is treated, and distributions from an LLC or partnership have their own rules. Talk to your tax advisor before the money moves.

What owners should do this quarter

• Size it yourself first. NOI divided by 1.25, divided by the loan constant at 6.4% to 6.9%. If that number is below your LTV limit, coverage is your constraint.
• Pull your note. Calculate today's prepayment premium before assuming the old loan is expensive to leave.
• Clean the rent roll. Document every legal increase and tie collections to deposits.
• Check seasoning. If you bought within the last 12 months, expect agency value to be capped at cost plus completed improvements.
• Run refinance against sale. Put ULA, the prepayment premium and your tax position side by side. Start early; our maturity playbook sets out the timeline.

Quick answers

How much cash can I take out of an apartment building in Los Angeles? Divide NOI by the coverage ratio, usually 1.20x to 1.25x, then by the loan constant at today's rate, cap the result at the lender's LTV limit, and subtract your current balance. In our example the loan reached about 57% of value.

What is the maximum LTV on an apartment cash-out refinance? Fannie Mae's small loan program allows up to 80%. In practice, coverage usually limits proceeds well below that at current rates.

Is cash from a refinance taxable? Generally not when you receive it, because a loan is not a sale. It can affect the tax on a later sale. Confirm with your tax advisor.

Does Measure ULA apply to a refinance? No. ULA is a tax on sales of property in the City of Los Angeles, and a refinance with no change in ownership is not a sale.

How do lenders treat rent-controlled units? At in-place rents, with no credit for turnover until it happens.

To learn what your building will actually return, send us the rent roll and operating statement. We will size it at today's rates within two business days. More is on our multifamily financing and permanent loan pages.

Sources. Treasury yields: Federal Reserve H.15 and FRED DGS10, October 5, 2026; historical 5-year and 10-year par yields for August 2025, September 2025 and July 2026: U.S. Treasury Daily Par Yield Curve Rates, accessed October 7, 2026. Fed decision: Federal Reserve, September 16, 2026. CMBS delinquency: Trepp via Yield PRO, October 4, 2026. Agency terms: Fannie Mae Small Mortgage Loan Program, accessed October 7, 2026; seasoning: Fannie Mae Multifamily Selling and Servicing Guide, Part II, Section 202.03, effective September 28, 2026; yield maintenance: Fannie Mae Form 4170, Schedule A. RSO: Los Angeles Housing Department and LAHD RSO rent increase page, accessed October 7, 2026; Los Angeles Council District 4, updated July 2, 2026; Office of Mayor Karen Bass, December 23, 2025. AB 1482: California Civil Code Section 1947.12. Measure ULA: City of Los Angeles Office of Finance, accessed October 7, 2026; Ervin Cohen & Jessup, August 21, 2026; Chief Legislative Analyst, Council File 26-0088-S1, May 13, 2026. Tax: Woodsam Associates, Inc. v. Commissioner, 198 F.2d 357 (2d Cir. 1952); IRS, Like-Kind Exchanges, updated May 1, 2026; Kieckhafer Schiffer, Tax Treatment of a Cash-out Refinance, 2018. The loan sizing example and the 6.60% rate are illustrative, not a quote. Nothing here is tax or legal advice.

Rates and terms referenced are drawn from public market data, transactions arranged by Piccard Financial and recent lender quotes, reflect conditions on the dates shown, and change with the market. Nothing here is an offer or a commitment to lend. Piccard Financial is a capital markets advisory firm, not a lender.