Another interest rate hike....

Hi!?

I hope your week is going well and thank you for taking the time to be with us. It's Wednesday and we all have the amazing opportunity finish the week strong.

Please know how awesome you and what a true blessing you are!

Last week was challenging. Between being?sick and that other demands, it made for quite the week. But in those times we become stronger.

Well...here we go again. The Fed is at it again.

We are going to see another 75bps rate hike announced today. How high can they go? How high will the market tolerate it as the curb of inflation is taking its tole?

It's hard to predict what the ceiling is and where the inflection point is.

As the FED is set to raise rates again, a lot of uncertainty of where we go is hanging in the balance. What does lending look like and what should we expect in the coming weeks and months as we persist through the commercial real estate transitioning period?

The Wall Street Journal reported yesterday in an article that,?

"Banks are lending less and charging higher interest rates for the loans they make to owners and buyers of office buildings, shopping centers and other commercial real estate. The tightening is a response to the sharp increase in interest rates this year triggered by high inflation as well as concerns of a possible recession that would lead to an increase in defaults."

Link to article here:?https://www.wsj.com/articles/real-estate-deal-making-slows-as-bank-lending-tumbles-11658836800?mod=re_commercial_bucket_pos1

In Q2, banks issued $20.6 billion in Mortgage Backed Securities (MBS) which was down from $29 billion in Q1. In June 2022 only $3.6 billion.

Smaller markets have taken the hit where not as much push and migration has taken the forefront. This is where deals aren't getting done.

So where do we go? What do we do?

We do what we always do!

We get aggressive with our understanding of the market and the place we are in. We don't run from it and we don't hide. We continue pushing forward and putting ourselves on the side of the seller.

We understand the value of assets and the impact that rising rates will have on the purchasing power of investors in these times. This is a time the ELITE investors are finding every way to make sure deals are getting done.

SO.........what does it take?

We are consistently keeping a pulse?with our lending partners. No matter the market circumstances, having solid relationships with local lending partners is a massive piece of the puzzle to getting deals done.

In my local market of Greenville, SC I am typically having coffee with a couple of our lenders every couple weeks. It's a two way road of value because we need to know what we should expect and they can expect that we are actively looking to keep them involved and drive business their direction.

It's important for us to keep a watchful eye on the Fed's decision, but it's also just as important if not more to not become consumed with their decision. We are rolling with it and continuing to keep the "deal maker" hat on.

We have to be more agile in our expectations in our deal analysis.?

-Cash On Cash will be lower in the 6.5% - 8.5% range for multifamily

-Equity multiple will likely be higher with longer hold times 6-9 years

-IRR will be more in the range of?13-17% on the high side but don't be surprised to see?13%-15%

Commercial Real estate is one of the greatest hedges against inflation in the world. Stable income every month or quarter that's not impacting your principal. Providing value to our residents and the community while working hard for you every step of the way. There are many things that could get in the way but we sure aren't going to let interest rates be one of them!

Education:

The?internal rate of return?(IRR)

The rate, expressed as a percentage, needed to convert the sum of all future uneven cash flow (cash flow,?sales proceeds?and principal pay down) to equal the?equity investment. IRR is one of the main factors the passive investor should focus on when qualifying a deal.

A very simple example is let’s say that you invest $50. The investment has cash flow of $5 in year 1, and $20 in year 2. At the end of year 2, the investment is liquidated and the $50 is returned.

The total profit is $25 ($5 year 1 + $20 year 2).

Simple division would say that the return is 50% ($25/50). But since time value of money (two years in this example) impacts return, the IRR is actually only 23.43%.

If we had received the $25 cash flow and $50 investment returned all in year 1, then yes, the IRR would be 50%. But because we had to "spread" the cash flow over two years, the return percentage is negatively impacted.

The timing of when cash flow is received has a significant and direct impact on the calculated return. In other words, the sooner you receive the cash, the higher the IRR will be.

Encouragement:

Some of the best gifts we have are yesterday and tomorrow. We get to use lessons from yesterday?to apply them today and impact tomorrow.

Scripture:

Do not be anxious

“Therefore I tell you,??do not be anxious about your life, what you will eat or what you will drink, nor about your body, what you will put on. Is not life more than food, and the body more than clothing??Look at the birds of the air: they neither sow nor reap nor gather into barns, and yet your heavenly Father feeds them.?Are you not of more value than they??And which of you by being anxious can add a single hour to his?span of life?"?Matthew 6: 25-27

Prayer:

I pray that you take time today to look around. Stop everything, and look around. Look at how blessed we are and how amazing the world around us is. Give thanks with a grateful heart and find joy in the small things!

Updates:

We have a new investment opportunity fresh and hot off the press!?

The Bonito Calabria Portfolio 281 Units RIGHT HERE in Greenville, SC.

Click on the link below to sign up for our webinar this Thursday, July 28 at 8pm ET / 5pm PT

We also will be bring a Build To Rent opportunity in Foley, AL in the coming weeks as we finalize plans for Phase 2 of the development.?

Please set up some time for us to have a conversation to learn more about this offering and our Build To Rent opportunities as we invest for IMPACT!

*These will be 506(C) opportunities. Must be an accredited investor.

Connect with COR13