Commercial Bridge Loans: 3 Things You Need to Know Today
Nov 11, 2016
According to the Chinese zodiac, 2016 is the year of the fire monkey. It was thereby predicted that this year would present a shift into rapid innovation and intelligent, heart-centered action. There certainly has been a great of deal of change and activity so far this year and, with the Presidential elections coming up, even more change is on the horizon.
Within all this activity and innovation, the three most important things affecting commercial bridge loans today are:
1. Interest Rates - Will They Rise or Won't They?
There has been so much speculation this year about interest rates that even routine pronouncements by individual Federal Reserve officials have been cited in relationship to market movements. Ultimately the reason for the countless hours of hypothetical chatter is that federal interest rates are incredibly important to the status and direction of many sectors of the economy. They affect the cost of borrowing at every level and therefore directly impact the profitability of commercial real estate investments. With a rate hike predicted for December, we will surely see the discussion continue after the November elections. Hard money commercial loan rates are traditionally determined through asset evaluation within the alternative lending market, but federal interest rates still play a role in determining the overall cost of a commercial hard money loan.
2. Technology - Big Data Meets Commercial Real Estate
Commercial real estate has traditionally been very difficult to value mainly because it is challenging to find comparable sales data for commercial properties. In each commercial area there may be only one of the specific type of business represented and commercial properties are not bought and sold with as much frequency as residential properties. In addition, the convenience/foot traffic of various commercial areas vary greatly, making it difficult to compare costs. The stability of renters can also vary widely depending on the type of business housed within the property. That is why big data is poised to have a significant effect on commercial real estate investing. If data can be sourced nationally then finding comparable properties starts to become much easier. Discrepancies are easier to spot when data sets can be combined and viewed quickly. Commercial lenders can now present financing offers faster and with greater accuracy in their value assessments. Because alternative capital funders such as Riverdale Funding base their commercial loans on the value of the asset being developed, increased accuracy in evaluating commercial properties is an especially important advantage to the borrower.
3. Tightening in the Institutional Credit Market
Regulatory pressure on big, institutional commercial real estate lenders increased this year with the Federal Reserve expressing concerns about weak credit risk practices and loosening commercial underwriting standards. Specifically, apartment construction loans in concentrated markets have been affected, with the commercial lending departments of banks drawing increased internal scrutiny. This, of course, is leading to increased opportunities for alternative loan structures such as hard money commercial loans and commercial bridge financing which tie the loan value to the property instead of the borrower. In fact, surveys from the National Real Estate Investor show that commercial real estate borrowers are still feeling confident and are tapping alternative funding sources such as commercial bridge loans and non-bank commercial lenders.
If you're interested in finding a commercial hard money loan, please contact Riverdale Funding at 888-368-4983 today.