Let's see what happens...
The Federal Reserve lowered the Federal funds rate ? of 1%.
Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have slowed, and the unemployment rate has moved up but remains low. Inflation has made further progress toward the Committee’s 2 percent objective but remains somewhat elevated.
Commercial Mortgage rates are currently unchanged averaging 6.25% – 7%+, depending on the borrower and the property being financed.
3 Reasons why your mortgage rates have not decreased:
1. The Fed rate cut was expected based on recent headlines. We experienced the cut in mortgage rates in early to mid August.
2. Investors believe the cut will stimulate the economy, which adds to consumer sentiment, propping up/leaving long term rates.
3. The uncertainty and cautious outlook of future inflation.
How Mortgage rates will affect the decisions in our St. Petersburg, FL syndications over the next 12 months…
Raven at Park Place was purchased in October/21 with a 3.5% interest rate. The property is stabilized and out performing the original projections, and providing 10%+ cash on cash distribution. The healthy, quarterly distributions are due in part to the low interest rate. The property has drastically increased in value but may not get refinanced, due to the 3.5% rate.
Raven at Bay Pines was purchased in August/22 with a 4.95% interest rate. We have successfully “forced value,” enabling Investor distributions to begin after the fifth quarter of ownership. Currently, the focus is consistent, efficient operations. We look forward to a refinance in 2025 which will return all or a large portion of the investor initial investment.
Raven at Casadova was purchased in August/23 with a 6% interest rate. We are nearing full occupancy and successfully executed the reposition process in 1 year! We are now exploring a refinance within the next 6 months which will return all or a large portion of the investor initial investment.
Raven at Bay Palms was purchased May 7/24. It’s ahead of projections and we expect a variety of great options.
Please reach out to me to discuss our future opportunities!
Regards,
Bill
REAL ESTATE LINGO:
Federal funds rate - The interest rate banks pay each other to borrow or lend money overnight.
Distributions - Investor % of cash flow
Forced Value -The property value increases due to increasing rents and minimizing expenses. (growing the NOI)
Reposition - Stabilizing an underperforming property