Commercial Real Estate Financing State of the Market | February 2024
Terrydale Capital
Feb 1, 2024 8 Min read
Terrydale Capital is committed to offering an extensive array of financial solutions to our clients. We place a high priority on staying well-informed about the constantly evolving market dynamics by maintaining ongoing communication with our network of capital market experts. Furthermore, we actively seek out emerging funding sources that are gaining notable attention. As part of our dedication to keeping you informed, especially in the dynamic market landscape, we have gathered financing rates from different regions across the country.
Private Money: Rate Range of 7.50%-12.00%
As markets continue to soften, private money lending has remained prominent as an enticing option for those looking to expedite transactions in 2023, and this sentiment persists. Its inherent advantages and adaptable short-term nature make it an appealing choice in today's financial landscape, albeit with the trade-off of potentially higher rates and wider interest rate spreads.
Debt Funds & Bridge Lenders: Rate Range of 6.00% – 13.00%
As the market enters 2024 with optimistic indicators but remains characterized by the persistent unpredictability of financial markets, a growing number of individuals are actively investigating alternative investment options. One choice witnessing a notable surge in popularity is the utilization of debt funds and bridge financing. These financial instruments hold particular appeal for individuals aiming to mitigate risk and pursue financial growth, thanks to their inherent advantages and short-term flexibility.
CMBS: Rate Range of 6.50%-9.50%
The escalating interest in Commercial Mortgage-Backed Securities (CMBS) persists, driven by the opportunity for lower interest rates in comparison to alternative financing channels. With available options enabling rates in the mid 6's, this avenue proves to be a valuable path for commercial investors to consider.
Commercial Banks: Rate Range of 7.50%-10.00%
Throughout 2023, banks consistently adopted more stringent underwriting procedures, emphasizing the significance of existing clients and depository relationships. Although this trend is continuing in the early months of 2024, there is a potential for a gradual expansion in lending from banks. While maintaining a strict approach to underwriting, banks have concurrently offered competitive pricing, resulting in some of the more favorable rates available in the market.
Credit Unions: Rate Range of 6.50% – 9.00%
In 2023 and continuing into 2024, credit unions have set themselves apart from other lenders by providing borrowers with the benefit of lower interest rates, making them an appealing option. It's crucial to recognize that credit unions typically follow a meticulous lending approach, involving a comprehensive underwriting process that may lead to extended closing times, especially in the prevailing market conditions. While credit unions offer competitive rates, borrowers should be prepared for potential delays in loan approval and closing due to the thorough nature of their underwriting procedures.
Fannie & Freddie: Rate Range of 5.75% – 8.00%
Transactions involving Fannie Mae and Freddie Mac continue to exhibit resilience, underscoring their stability. These transactions are deemed among the most advantageous options for residential and multifamily properties. Many buyers are now choosing to reduce leverage, willingly investing additional equity to secure more favorable interest rates. Embracing this strategic approach allows them to capitalize on current market conditions and obtain enhanced financing terms for their investments.
FHA: Rate Range of 5.65% -7.75%
The present interest rate trend related to FHA loans in the commercial real estate sector provides borrowers with a valuable chance to seamlessly transition from construction and bridge loans. This transition can be especially beneficial for individuals aiming for financial stability. Opting for FHA loans in the midst of a rising interest rate environment enables borrowers to tap into long-term financing options, providing heightened stability and potentially reducing overall expenses.
HUD: Rate Range of 6.50% +
Emerging as a prominent financing option in the latter half of 2023, HUD is poised to remain a reliable vehicle for investors in 2024. With noteworthy Loan-to-Value ratios of 90% for acquisitions and 80% for refinances, along with 35-year fully amortizing, non-recourse loans, HUD proves to be an ideal choice for a range of scenarios. Whether it involves new builds, later vintages, multifamily properties, or long-term holds, HUD financing excels at maximizing cash flows.
SBA: Rate Range of 7.50%-10.00%
The Small Business Administration (SBA) has emerged as a valuable choice for both novice investors and those seeking lower initial down payments. This option has proven to be advantageous, especially for owner-occupied properties. Furthermore, there is a growing trend among investors to explore the transition from the SBA 7(a) program to the 504 option, particularly for refinancing purposes.
Life Company: Rate Range of 6.75%-8.50%
Leveraging creative strategies and maintaining flexible asset preferences, LifeCo options can provide competitive rates in the low 7s. Actively lending on all asset classes. Call us to learn more.
In today’s market, there are many options available for structuring deals, and Mezzanine and Equity financing enable our clients to pursue larger projects. Experienced and qualified investors may even be able to secure a deal with as little as a 5% down payment. Moving into 2024, we expect to see a surge in activity regarding this avenue.
Partner With Terrydale Capital for Your Debt Financing Needs
When it comes to debt financing, understanding the right timing, process, and options is crucial. At Terrydale Capital, we provide a comprehensive range of commercial loan solutions tailored to meet your business's unique needs.
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Headquartered in Dallas, Texas, Terrydale Capital is a leader in commercial real estate financing. We have close relationships with the nation’s top banks, lenders & family offices allowing us to provide the most competitive financing solutions in the market.
