Our theme this week is “opportunity,” in case you didn’t get that from the quotes! There is a LOT of negativity floating around lately and uncharacteristically, it is even coming from our new president. Now I’m old enough to remember a few other very drastic recessions and I recall our Commander-in-Chiefs in those days being very positive, up-beat, and simply positive when talking about the challenges we faced at the time. Not so, today.
So I hereby take it upon myself to be that uplifting voice in the distance, growing ever closer. Yes, we face challenges, but every challenge presents us with opportunity. Here are some examples:
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If prices are falling, that means you will be able to buy more with your same dollars. This applies to commercial real estate as well as it does to a gallon of milk.
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Interest rates are also low, making it easier to stabilize troubled properties.
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People are saving like never before, creating pools of future investment capital.
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Foolish government spending and failing programs are finally being exposed to scrutiny, meaning that in the future we may have more responsible governance.
It will get better. And it already is better for people looking for opportunities. Cap rates are adjusting to reality, meaning that rates of return on commercial property are becoming more realistic. Some of that saved up capital is going to find its way into commercial real estate once we sizzle out the “fat.”
Commercial Financing Tip
Check the Leases: You will be doing yourself a favor to check the lease rates on any commercial properties you are seeking to finance. Many lessees are finding that the rates they signed on for a year or two ago are significantly above market. First, lenders will be marking these leases to market when they analyze the property’s income stream, basically reducing potential loan amounts. Second, lessees are going back to landlords to renegotiate their lease rates, in effect saying “reduce the rate or we’re leaving.” While neither option is good from the landlord’s point of view, they would most likely try to keep the tenant in this market. So be aware of realistic market rents when analyzing your proposed commercial real estate debt.
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Here is this week’s commercial financing tip video:
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Craig Higdon, “The Insider”
www.ExcelsionMortgage.com, www.InvestmentPropertyInsider.com, www.CommercialLoanCoach.com
Craig Higdon has over 16 years experience in financing commercial loans, small business loans, construction loans, and land loans. He owns Excelsion Mortgage, a commercial mortgage direct lender offering a wide range of commercial lending resources to investors and commercial real estate service providers.
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