In recent times, rising inflation has forced many investors to completely reset their expectations on the state of the commercial real estate and investment properties market. However, the moment interest rates stabilize, the real estate industry is bound to pick up and perform even better than before. In the last few months, only the real estate investments with the clearest plans and adequate financial support have moved forward. Summer seasonality is a key factor that may be influencing this trend.
According to all apparent indications, this recession is not anticipated to be as severe to the real estate marketplace as the great recession of 2008. Historically, real estate is inflation resistant, and should perform remarkably well for the rest of the year. Here at ReProp Financial, we have been at the forefront of offering fast and hassle-free alternative commercial real estate lending and look forward to helping more borrowers realize their business dreams.
One of the factors that will lead to the stabilization of interest rates and commercial mortgage rates is finding a better process to predict inflation and how they can start to come back down. Thanks to the Fed funds rate hikes and inflation numbers, interest rates are overreaching since most variables are still unknown and both traditional and private lenders have become more cautious.
A majority of private lenders have put a pause on originating loans for fear of originating under market. Most lenders are in the dark about how to price their financing so they attempt to hedge them. However, with the volatility going on, this will prove to be a very difficult undertaking. When inflation stabilizes and starts to trend down, interest rates should stabilize substantially.
Another important factor that is weighing heavily on many alternative lenders like ReProp Financial, is borrower creditworthiness. Essentially, the main question we want answered is “Does the prospective borrower have the liquidity to afford the debt payments, and do they have a coherent payoff strategy?” We’ve always been in a good position to underwrite the collateral our borrowers provide. Our willingness to lend directly correlates with a clear path to borrower’s success. The question is, can we place reliance on this sort of asset class or this collateral type? And how much can we be willing to lend on them? This is something we have been more cautious about when evaluating a borrower’s plan and creditworthiness. A good thing in all this is credit standards have continued to remain strong and ReProp Financial has not had to balance increased risky loan products in our portfolio.
At ReProp Financial, we have always been highly versatile in the real estate we can finance. We loan on all kinds of property types from retail to non-owner occupied single-family, multi-family housing, and even light industrial real estate. Despite current circumstances, we have not removed any types of real estate from our list. We will, however, be more cautious with some specific collateral types.
There are a number of factors that have made this segment of commercial real estate popular. This includes affordability and higher appreciation, particularly when compared to multi-family units. Single-family properties are also an excellent source of regular passive income and easy to hold for upcoming investors. ReProp Financial has also seen a lot of traction on light industrial real estate. It is important to note that these sorts of opportunities have always been one of our strong points.
ReProp Financial offers a wide array of solutions for your lending needs. We offer commercial loans to provide you with the funding you need to achieve your goals.
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