Posted: December 4, 2023 | By: LendVer Staff –
In the dynamic realm of real estate, strategic timing is often the key to unlocking lucrative opportunities. As we navigate through economic volatility and the ever-evolving financial landscape, there’s a compelling case to be made for those considering commercial real estate financing and residential investment property financing. Although home loan rates continue to climb, commercial real estate financing is still characterized by relatively low interest rates and generous loan-to-value (LTV) ratios.
Affordable Interest Rates: A Closing Window of Opportunity
One of the most enticing aspects of current commercial real estate and residential investment property financing is that interest rates are actually still historically low. The current Prime rate, a common benchmark index for bank and SBA commercial real estate financing sits at 8.5%. This may seem high considering borrowing costs in recent prior years had reached unprecedented lows. However, for most of the time between August of 1983 and February of 2000, the Prime rate sat around 8.5% and even drifted as high as 13.0%.
Plus, investment residential financing for single family homes, 2 to 4 unit multifamily properties, and even portfolios of residential investment properties can still be had at rates as low as 7.75%.
Strategic Leverage: Maximizing Returns with High LTVs
Leverage is a powerful tool in the hands of savvy real estate investors. The current market is still characterized by lenders offering high loan-to-value ratios, providing investors with the ability to acquire properties with a smaller upfront capital investment. Experienced SBA lenders continue to offer commercial real estate financing up to 100% loan-to-value for established and creditworthy business owners.
Eligible residential property investors can also still access Fix and Flip and Bridge Loans up to 95% loan-to-cost, and rental property DSCR Loans up to 80% loan-to-value. This strategic use of leverage can amplify returns, allowing investors to control larger assets and potentially benefit from property appreciation over time.
Mitigating Risks: Diversification and Prudent Financing
Reasonably low rates and high LTVs are undeniable advantages to capitalizing on strategic opportunities during uncertain financial times, but it’s crucial for investors to approach financing with a risk-conscious mindset. Diversification remains a key strategy to mitigate risks associated with commercial real estate investments.
Spreading investments across different property types and geographic locations can help safeguard against market fluctuations and localized economic downturns. Established businesses can also benefit from depreciation and rent savings that come from purchasing their own location with a high-LTV SBA loan.
Due Diligence: The Foundation of Successful Investments
You may feel a sense of urgency to capitalize on favorable financing terms while they are still available, but due diligence should not be overlooked. Thoroughly researching and analyzing potential investment properties and exploring various financing options is essential for making informed decisions. Understanding market and financing trends, evaluating property and different lenders carefully, and assessing the potential for future business growth are critical steps to ensuring a successful and sustainable real estate investment.
Conclusion: Seize the Moment While You Still Can
The current landscape for commercial real estate financing and residential investment property financing is indeed conducive to strategic acquisitions. Historically affordable interest rates and high LTVs create a favorable environment for investors and business owners to maximize returns and build equity. However, success in real estate requires a balanced approach, combining the benefits of favorable financing terms with prudent risk management and due diligence. As the saying goes, “hope for the best but prepare for the worst”, and in today’s market, preparedness involves seizing the moment with strategic and informed decisions.
Interested in accessing affordable commercial real estate financing? Contact our recommended best commercial real estate lender South End Capital.
Interested in accessing affordable investment residential real estate financing? Contact our recommended best investment residential real estate lender KIAVI.