Things to consider  when it comes to investment and financing alternatives.

These continue to be volatile times for commercial real estate investing. Overbuilt markets are showing their weaknesses, capitalization rates are making cyclical moves. On the positive side seasoned investors know that a “credit crunch” and a market shift represent new opportunity. Those of us with a background in real estate analysis and underwriting actually think that it’s about time to get back to the fundamental economics of “the deal”. 

The more things change…

An investors greatest concern is now related to financing and the cost of capital. If interest rates creep up capitalization rates will rise and values will fall. Today interest rates are holding in 7 to 8% range for a 10 year term and a 25 year amortization with 1.35 debt coverage ratio. Self storage investments remain a winner in terms of comparatively high returns accompanied by low loan loss ratios

As noted this current market correction represents a great opportunity for the Buyer. Even a seasoned self storage investor/owner can benefit from today’s historically low interest rates. But all parties need to be aware of the new realities of today’s market. The transaction may be dependent upon the lender’s ability to deliver the deal rather than the cheapest loan offered. It is always prudent to work with a lending source that can offer two, three, or more options for your consideration. Remember markets have not shut down. We are just back to basics and your due diligence and a cautious game plan will pay off.   

T. Budd Fletcher  (831) 239-8504

bridgecapital@gmail.com