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Having an investment policy statement

The FOMC (Federal Open Market Committee) has cut the target range for the fed funds rate last month for the third time.  Prime went from 5.5% to 4.75%. Basically, the Fed completely reverse the interest rate direction by acknowledging there may be a recession on the horizon.

Commercial Mortgage Rates have declined recently.  5 Year Fixed Rate for general CRE is at 4.00% and 10 Year Fixed Rate is at 4.65% for General CRE.  For special purpose properties like: Hotel, Assisted Living Facilities, and Gas Stations, the pricing 4.5% for 5 Years and 5.15% for 10 Year Rates.  These rates are not likely going lower regardless of what the Fed’s do. It would be difficult for banks to make profit on loans under 4% besides Multifamily loans.

So what are business owners doing now? The savvy ones are re-structuring their portfolio of properties, taking cash out from one property to pay down loans for properties that are not doing as well.  Some are refinancing for CapEx (Capital Expenditures) and upgrading to the building. Some are taking cash out on conventional loans and paying off all credit card debt. Regardless all are tightening their budget.

Here is what we would recommend.  Having an investment policy statement (basically your niche) and Risk Allocation should be categorized as the following: Aggressive, Moderate and Conservative. 50% Conservative DSCR 1.4x and Above) , 25% Moderate (1.25 to 1.4)  and 25% Aggressive (1.25 and under). Following an Asset allocation model to manage real estate portfolio.

Let’s look at all the opportunities that you may be missing while these changes occur.  We want to meet with you to help create a plan to grow your business. As you grow, we grow.

CH Capital Partners – always working to help our clients grow.

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