Destino Industrial
  • Home
  • Properties
  • Services
  • Client's Advantage
  • Industrial Market Insight
  • About
    • Testimonials
    • About Lee & Associates
    • About Our Team
    • Contact Us
  • Home
  • Properties
  • Services
  • Client's Advantage
  • Industrial Market Insight
  • About
    • Testimonials
    • About Lee & Associates
    • About Our Team
    • Contact Us

March Madness.. of the Real Estate Variety…Impact of Interest Rates

3/28/2017

 
Picture
We are well into March 2017 and the madness is just heating up. As college basketball teams have navigated the big NCAA tournament, participants in the real estate and corresponding business sectors are also adjusting for the interest rate hike(s) that came from the Federal Reserve this month, with potentially more of them later this year.  But the most important question facing market participants is “How will these rate increases affect me?”
 
Well, let’s look at that question from two perspectives:

Owner/Occupant deals
Investment property deals

Picture
​Owner/Occupant Deals
While an increase in interest rates generally does not change the current owner’s position in a property (unless they have some type of adjustable rate mortgage), it is important to understand the dynamics at play if considering selling that property.  The bottom line is that a rise in interest rates is going to affect the purchasing power of the buyers interested in making an acquisition.
 
For example, an increase in the interest rate for a Small Business Administration (SBA) loan will affect the loan payment on a $2,000,000 property acquisition as follows*:
  • An Interest rate increase from 4.5% to 5.0% can cause the monthly payment to increase from $10,000 to $10,500. 
  • Additionally, as interest rates were closer to 4% a year ago, that same payment could have been around $9,500.  
             *Assumptions: 10% down payment, 25-year amortization.
 
Therefore, if interest rates increase as projected, that same buyer who previously could afford a $9,500 payment on a $1,879,981 property ($1,710,000 loan amount @ 4.5%) could now only buy a $1,787,500 property ($1,625,000 loan amount @ 5.0%).  That will clearly affect both buyers and sellers; sellers will have to consider selling at that discount, or buyers will have to look for slightly smaller properties.  


Comments are closed.

    Author

    Christopher J. Destino, SIOR, a Principal at Lee & Associates,  is  an engaging, responsive professional who enjoys working closely with his clients and helping them succeed.

    Contact  Christopher 
    Today!!

    Picture

    Additional Market Articles and Reports 
    (click here for archive)
    Picture


    ​Industrial Insight Archives Below

    January 2023
    December 2022
    October 2022
    September 2022
    August 2022
    June 2022
    April 2022
    March 2022
    February 2022
    December 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    March 2021
    February 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    November 2019
    October 2019
    August 2019
    July 2019
    June 2019
    April 2019
    February 2019
    January 2019
    December 2018
    November 2018
    September 2018
    June 2018
    April 2018
    March 2018
    February 2018
    December 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    September 2015
    June 2015
    May 2015
    March 2015
    January 2015
    October 2014
    July 2014
    March 2014
    December 2013
    October 2013
    August 2013
    April 2013
    September 2012

    Categories

    All
    Merry Christmas
    Sublease

“Working with a Professional  
​
Achieves Professional Results”
Picture
Lee & Associates
Commercial Real Estate Services

1004 W. Taft Avenue, Suite 150 
Orange, CA 92865
​LeeOrange.com
Corporate ID #01011260 

Picture
Christopher J. Destino, SIOR
Principal
714.564.7181
cdestino@lee-associates.com
​Destino Industrial Team
DRE #01447060

Picture
Picture
Picture