Commercial Real Estate Financing State of the Market | March 2024
Terrydale Capital
Mar 1, 2024 8 Min read
Terrydale Capital is dedicated to providing a comprehensive range of financial solutions to our clients. We prioritize staying informed about the continuously shifting market dynamics by maintaining continuous communication with our network of capital market experts. Moreover, we proactively explore emerging funding sources that are garnering significant attention. In line with our commitment to keeping you updated, particularly in the dynamic market environment, we have compiled financing rates from various regions across the country.
Private Money: Rate Range of 8.50%-12.50%
With ongoing market softening, private money lending has retained its prominence as an attractive option for expediting transactions in 2024, a sentiment that continues to prevail. Its inherent advantages and flexible short-term nature render it a compelling choice in today's financial environment, albeit with the trade-off of potentially higher rates and broader interest rate spreads.
Debt Funds & Bridge Lenders: Rate Range of 6.00% – 11.25%
As the market ventures into 2024 amidst optimistic indicators yet still marked by the ongoing unpredictability of financial markets, an increasing number of individuals are actively exploring alternative investment avenues. One option experiencing a significant surge in popularity is the utilization of debt funds and bridge financing. These financial tools hold particular allure for individuals seeking to mitigate risk and pursue financial growth, owing to their inherent advantages and short-term flexibility.
CMBS: Rate Range of 6.50%-9.50%
The growing interest in Commercial Mortgage-Backed Securities (CMBS) continues unabated, fueled by the prospect of lower interest rates compared to alternative financing channels. With available options offering rates in the mid-6s, this avenue proves to be a valuable consideration for commercial investors.
Commercial Banks: Rate Range of 5.65%-10.00%
In 2023, banks consistently implemented stricter underwriting procedures, placing greater emphasis on existing clients and depositor relationships. While this trend persists in the early months of 2024, there's a gradual uptick in lending from banks. Despite maintaining a stringent approach to underwriting, banks have also been offering more and more competitive pricing, leading to some of the more favorable rates available in the market.
Credit Unions: Rate Range of 6.50% – 9.00%
Coming into 2024, credit unions have distinguished themselves from other lenders by offering borrowers the advantage of lower interest rates, rendering them an attractive option. It's important to acknowledge that credit unions typically adhere to a thorough lending approach, involving a comprehensive underwriting process that may result in extended closing times, particularly in the current market conditions. While credit unions provide competitive rates, borrowers should anticipate potential delays in loan approval and closing owing to the meticulous nature of their underwriting procedures.
Fannie & Freddie: Rate Range of 5.50% – 8.00%
Transactions involving Fannie Mae and Freddie Mac persist in demonstrating resilience, highlighting their stability in the market. These transactions are widely regarded as some of the most advantageous options for residential and multifamily properties. Many buyers are opting to decrease leverage, willingly injecting additional equity to secure more favorable interest rates. Embracing this strategic approach enables them to leverage current market conditions and secure improved financing terms for their investments.
FHA: Rate Range of 5.65% -7.75%
The current interest rate trend associated with FHA loans in the commercial real estate sector offers borrowers a valuable opportunity to smoothly transition from construction and bridge loans. This shift can be particularly advantageous for individuals seeking financial stability. Choosing FHA loans amid 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 6.00% +
Emerging as a prominent financing option in the latter half of 2023, HUD is positioned to continue as a reliable vehicle for investors in 2024. Offering notable 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 variety of scenarios. Whether it pertains to new builds, later vintages, multifamily properties, or long-term holds, HUD financing excels at optimizing cash flows.
SBA: Rate Range of 7.25%-10.00%
The Small Business Administration (SBA) has emerged as a valuable option for both novice investors and those aiming for lower initial down payments. This choice has demonstrated its advantages, particularly for owner-occupied properties. Additionally, there is a rising trend among investors to consider transitioning from the SBA 7(a) program to the 504 option, especially for refinancing purposes.
Life Company: Rate Range of 6.50%-8.50%
Leveraging creative strategies and maintaining flexible asset preferences, LifeCo options can provide competitive rates in the mid 6's. 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.
