Commercial Real Estate

What is a Treasury Rate (Yield)

The US Treasury Yield (also referred to as the Treasury Yield Curve Rates, Constant Maturity Treasury Rates, or CMTs) are calculated by the US Department of the Treasury from the daily yield curve. These  rates are essentially the return an investor would receive from the purchase of a US government debt obligation (i. e. a bill, note or bond); it is the interest rate that the government pays to the investors in order to borrow money for different lengths of time (i. e. 30 days, 60 days, 90 days, 6 months for short terms and 1, 2, 3, 5, 7, 10, 20, and 30 years for longer terms). [Insert Current Treasury Rates Here]The treasury rate curve is plotted on an x and y axis and shows several y...

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Interest Rate Swaps & How to Use Them

A bank may suggest that a borrower use an interest rate swap (IRS) in conjunction with an adjustable-rate mortgage (ARM) instead of a traditional ARM or fixed-rate commercial real estate loan product when interest rates are low but expected to rise in the future. This hedges future interest rate risk and can have certain advantages over typical fixed rate mortgage products. Typically borrowers will choose a swap rather than a typical ARM or fixed rate portfolio loan for the following reasons:To get a lower all-in interest rate and paymentsTo protect against future interest rate increasesTo lessen or eliminate potential prepayment penalties A swap is a type of interest rate derivative (IRD) t...

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How Millennials Are Changing Commercial Real Estate: Office Vacancies (Pt. 2)

The millennial attitude toward work is very different than it was for Generation X or the Baby Boomers. While being extremely savvy with technology (we are the “Facebook” generation after all), millennials work to live, not live to work. Slaving away to prove our worth and escalate up the corporate ladder at a Fortune 500 company for 40-50 years until we finally retire is not the goal of our generation (no offense, parents and grandparents! ). Instead we are a generation of efficiency, technology, creativity, and experiences. While we understand the necessity of working to make money and provide a sense of accomplishment, we value our personal lives substantially more than the generati...

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How Millennials Are Changing Commercial Real Estate: Crowdfunding (Pt. 1)

Many members of the so-called “millennial” generation (1982-2004) entered into the job market during one of the most difficult times in US history—the Great Recession. Loaded with student debt, no savings, big dreams, and the skills learned during internships, we had to come out of school and try to make a living when most companies were not only not hiring, but letting go some of their most seasoned employees. This difficult economic environment paired with the technological savviness of our generation has combined to make a meaningful and unique contribution to the growth of commercial real estate, which has been long overdue. One of the most interesting ways this creativity has expr...

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5 Reasons Your Commercial Mortgage Rate Could Go Up Before Closing

For both new and experienced investors, the commercial loan diligence and closing process can be stressful, and the last thing any borrower wants to think about is their interest rate increasing between submitting their loan application and closing. However, there are several factors that can lead to an interest rate change before the loan closes, which can not only affect investor returns, but potentially down payments if the change is drastic enough. The 5 most common reasons an interest rate increase can happen are the following:One of the easiest ways to protect yourself from interest rate increases is to lock the interest rate before closing. Locks (if available) can freeze the rate for...

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5 Ways Commercial Real Estate is Different Than Residential

Commercial and residential real estate differ in many ways, which is why it can sometimes be difficult for a residential investor to transition into the commercial arena without professional assistance. These are just some of the ways residential and commercial properties differ:1.  Property Occupancy.  Residential real estate is a single-family home or building with 4 residential units or less (i. e. duplex, triplex, 4-plex) that has individual(s) or family(ies) as tenants. A commercial property is any property that has commercial businesses as tenants or a multifamily complex with 5 or more units. Both a residential and a commercial property will be zoned accordingly with the county it i...

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5 Mistakes First-Time Commercial Real Estate Investors Make

Commercial Real Estate is unlike any other investment because it is a real asset that can be affected by not only the real estate market, but also the greater financial markets, changes in consumer habits, employment, and other seemingly unrelated factors. That is why it is one of the most complex investments to make for those that are new or unfamiliar with the industry. Here are some of the most common CRE newbie pitfalls:There are many reasons a property might be the “wrong” property for a first-time investor. Some of the most common reasons (although non-exclusive) are the following:The wrong location. Maybe the property:is too far from the buyer’s primary residence for proper ov...

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