Commercial Real Estate Financing State of the Market | January 2024
Terrydale Capital
Jan 1, 2024 8 Min read
Terrydale Capital is dedicated to providing a wide range of financial solutions to our clients. We prioritize maintaining a comprehensive understanding of the ever-changing market dynamics through continuous communication with our network of capital market experts. Additionally, we proactively identify emerging funding sources that are garnering significant attention. In our commitment to keeping you informed, particularly in the dynamic market landscape, we have compiled financing rates from various regions across the country and give some insight into some expectations moving into 2024.
Private Money: Rate Range of 10.00%-15.00%
Amidst the constant unpredictability of financial markets, an ever-growing number of people are turning towards alternative investment options. Private money lending garnered attention as an appealing choice for individuals seeking to close fast in 2023 and the same sentiment remains. Its inherent advantages and flexible short-term nature make it an attractive option in today's financial environment; however it can come at the expense of higher rates.
Debt Funds & Bridge Lenders: Rate Range of 9.00% – 13.00%
With the market at the outset of 2024 looking up but still marked by the continual unpredictability of financial markets, an increasing number of individuals are actively exploring alternative investment avenues. One option experiencing a significant surge in popularity is debt funds and bridge financing. These financial instruments are particularly attractive to those seeking to manage risk and pursue financial growth, owing to their inherent benefits and short-term flexibility.
CMBS: Rate Range of 7.50%-8.50%
There has been a continued growth in interest in CMBS options given the allowance for lower interest rates compared to alternative financing avenues. With options we have seen allowing for rates in the low 7's, this avenue can be a valuable road to take for commercial investors.
Commercial Banks: Rate Range of 7.00%-9.00%
2023 was marked with banks consistently implementing stricter underwriting procedures. This included placing increased importance on existing clients and depository relationships. While this will be the case for early 2024, we can potentially expect to see broader lending from banks begin to open up. However, while they remain stricter on their underwriting, their pricing has allowed for some of the better rates in the market.
Credit Unions: Rate Range of 6.75% – 9.00%
Credit unions distinguished themselves from other lenders in 2023 and continue in 2024 by offering borrowers the advantage of lower interest rates, making them an attractive option. It's important to acknowledge that credit unions generally adhere to a more thorough lending approach. This involves a comprehensive underwriting process, which may result in extended closing times, particularly in the current market conditions. While credit unions provide competitive rates, borrowers should be prepared for potential delays in loan approval and closing due to the meticulous nature of their underwriting procedures.
Fannie & Freddie: Rate Range of 6.45% – 7.50%
Despite the ongoing market turbulence, transactions involving Fannie Mae and Freddie Mac remain steadfast, highlighting their resilience. We consider these transactions to be among the most favorable choices for residential and multifamily properties. Many buyers are now opting for reduced leverage and are prepared to invest additional equity to secure more favorable interest rates. By embracing this strategy, they can capitalize on the current market conditions and secure improved financing terms for their investments.
FHA: Rate Range of 5.65% -7.75%
The current interest rate trajectory associated with FHA loans in the commercial real estate sector presents borrowers with a valuable opportunity to smoothly transition from construction and bridge loans. This shift can be particularly advantageous for individuals seeking financial stability. Utilizing FHA loans amidst a rising interest rate environment allows borrowers to access long-term financing options, offering increased stability and potentially lowering overall expenses.
HUD: Rate Range of 7.00% +
As an up and coming financing type in the later half of 2023, HUD is posed to continue to be a reliable vehicle for investors in 2024. With impressive Loan-to-Value ratios of 90% for acquisitions and 80% for refinances, coupled with 35-year fully amortizing, non-recourse loans, HUD proves to be an ideal choice for various scenarios. Whether it's new builds, later vintages, multifamily properties, or long-term holds, HUD financing excels at maximizing cash flows.
SBA: Rate Range of 7.50%-10.50%
SBA has become a valuable choice for both novice investors and those looking for lower initial down payments. This option has proven advantageous, particularly for owner-occupied properties. Additionally, there is a growing trend of investors exploring the transition from SBA 7(a) to the 504 option for refinancing purposes.
Life Company: Rate Range of 7.10%-9.00%
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.
