Good morning to a welcomed break in the heat;
Commercial Lending
The Business and Investor Side of Our Business
Commercial property ownership: A story of different segments.
1) Owner occupied. The age old question: Pay a mortgage and eventually own the property vs ever increasing rents. My question is: What are the 5, 10 and 20 year goals for the business? Let’s talk to help flesh out the buy vs rent question.
2) Apartments. Always a solid investment, despite the increased cap rates. Cap rates go up in heated economy and down when the economy cools. Such tendencies are the same with all property. Keep in mind: Market value counts only when you buy, refinance or sell. Part of this technical value, we talk about location and future rents and expenses. This helps set a needed model.
3) Traditional Commercial. Here is a bit dicier segment. From REITS turning back a dozen hospitals and the current Cap rate environment effecting property values and ability to support a refinance. Herein, we consider loan-to-value ratios, investment return guarantees – structures and location, plus the assumption of anticipated appreciation. Just picking a couple of points.
The up-shot: Commercial Real Estate is a realm where many make money, but key is good preparation to prevent over reacting or waiting too long. With this, my goal is to continue the Good Bad n’ Ugly conversations, in order to offer my expertise. Plus, with solid information, challenge assumptions and broaden one’s thinking. The goal: Your successfully riding out the uncertainties in the market and achieving financial success.
The Economic Narrative:
1) Inflation: Everyone’s favorite topic for planning and prognosticating. Recent PPI – Producer Price Index – came in lower, into the low 2’s. The Core rate also dropped.
Plus, the CPI moved to just under 3 %, as the Core CPI came down to 3.2 %.
1) Interest rates: After Fed president Jerome Powell’s last after-meeting narrative, market’s again speculated an interest rate cut at the Fed’s September meeting. Note: 10-year treasure still holding at under 4 %. Also: this week’s, is the annual symposium in Jackson Hole, WY. The follow-up comments will be interesting, in light of the recent weakening of inflation metrics.
2) Residential Real Estate: What can best be said, but to summarize our market condition. Not enough supply, not enough new inventory, plus stubborn development prospects. This supply reality will continue to be a challenge, over the next decade plus. The bright side: Anticipate prices holding up quite well. Do you own a home – celebrate. If not, let’s start preparing today so you are ready to buy, when the timing is right. An important note: Chasing rates or drops in price has not worked for many my entire career.
3) Commercial Real Estate: My prediction: We will continue to ‘kick the can down the road’ until 1st / 2nd quarter next year. Elections matter. The free market will then be able to flush out market confusions, beginning with the first year of a new president and Congress.
4) Apartment: Latest news clips point out the large reduction in future apartment construction. The usual comments as to why: land supply, financing costs, labor costs, Yet this ignores we have 915 K multi-family units under construction – with half in the permit stage. Most recent report show an increase in permits, as builder’s anticipate better rates over the next 6 months. Question: Watch the fallout of increasing permits not going into construction.
My perspective: Short-term, the current number of units coming online, will bring a temporary market saturation. Why? Because rents are relatively flat, inflation higher, and concerns about jobs and real wage growth. Plus, we have a good supply coming online Thus the singular argument of high costs is misleading. Market math: If rents increase more than inflation – build. When rents are NOT keeping up with inflation – dial back. Love the market logic.
Call us. We are ready to help today.
I hope you find these insights instructive for Commercial investing and our Residential work! Key to Both – Discipline, Preparation, and Patience.
Banking and Financing: DIY or using a Broker.
DIY: Benefit: You can trade on your historical connection with your Bank. Downside: You are not always sure they are actually getting it done. The Bank loan agent brings the deal in the door, but they are not allowed to tell you the percentage of actual closings.
Broker: Yes, you do pay a point – Except with SBA and residential lending. Benefits: Our connections to lending sources, interaction with industry groups, and continued conversations with our peers. This brings about true and open competition able to quickly adapt to the shifting landscape and your unique situation. Do you benefit from hiring Mike Ryan? Time proves to be Yes. And with future challenges ahead, all the more reason to call. As a Broker, your victory is my win.
Good News – Call Today
Our commercial successes continues. The depth of our lending partners allows us to work with certainty of execution. We are getting it done. We have the proven trust and credibility!
Do you have an under performing, out-of-state property, with a ballon note coming due. We are able to provided solutions for mixed use project to avoid a default. This helps buy the owner needed time to finish leasing up the property and obtain long-term financing. CALL.
To this, we have another client moving forward and purchasing an additional small apartment building. Good news: Interest rates in the 5’s. Not all the news is bad. Let’s talk.
More Good new: We hear from our friends that business in the tax-deferred exchange business, is booming. People are moving and investment assets are being traded. Don’t hesitate to reach out to us for information and news on ALL the benefits of deferring Capital Gains taxes. KEY: Know your full range of options and benefits, before simply pulling the sell trigger.
Consistent calls: Business opportunities. Good news, now being 3 years past the CoVid disruption, many are doing well. With this, much is going on in the investing market – AI expansion to name one. Regardless, the challenges of the new frontiers, there is one constant: Digging deep in seeking solutions for our clients and their unique projects. Know someone in need of such help? Call us ! We are ready and now is the best time to begin the process.
Consider as well, the breadth of our lending, from 1) business-purpose loans – with light documentation – to 2) re-development building projects for housing, plus 3) commercial property purchases. How does this work? It works because of who we are. We offer a broad range of lending partners able to provide flexible loans, excellent programs, and great terms. It is how we help move your life forward and our track record shows it. It is what keep our phone ringing. Let’s talk. We can help.
Consider Loans Coming Due: They are in high demand, as evidenced by our increased work to refinance various commercial properties. Recent statistics show 30 % of maturing loans were refinanced, 25 % were modified and 40 % are in default. In todays market of risk and uncertainties, it’s key to check loan parameters and due dates. For certain, don’t miss the annual lender requested financial statement. Key: Stay ahead of coming due dates to keep your lender smiling. Good organization is most worthy. We are ready to help.
NOTE: If you have troubles, please call. We can help with loan modifications
Good News: We have great lending partners. They respect our work and attention to detail. This is good news for you, as they trust our approach and loan packages. In response, we carefully strive to maintain the quality of their depository relationships. This is called team chemistry and is what makes our lending relationship, a winner. Join our team.
You have heard me say: It starts with a first conversation. Let’s talk today.
Enjoy your family and friends this Spring season. With all the financial talk, key is who we have around us and with us. Be well and be safe, knowing we are here for you.
