TCR was recently interviewed by the industry recognized Crittenden publication for multifamily housing finance outlook. Primary concerns were new acquisitions where real estate taxes and insurance costs increasing from historical levels. Our interest rate outlook was stable with no real concern for increases over 2020.
UPDATE ON COST OF MONEY FOR COMMERCIAL REAL ESTATE
PRODUCT TYPE LTV RATIO RATE TODAY SPREAD OVER 10 YR
Apartments 85% 3.60 1.33+.65 for HUD MIP
80% 3.90% to 4.00% 2.28 to 2.38
65% 3.55% to 3.85% 1.93 to 2.23
Many lower leveraged deals have a rate floor from life companies and other lenders. We are seeing floors as low as 3.25% to 3.55% for immediate pricing. These rates are minimum terms of 10 years with 30-year amortization periods. 35-year amortization deals with IO terms are available from life companies with general rate ranges in the 3.50% to 3.55% for 15 years and 60% LTV ratios.
Other product types can be leveraged by adding the 10-year treasury of 1.62% and adding 250 to 300 basis points.
FOR ACQUISITIONS, MAKE SURE YOU FACTOR IN THE NEW REAL ESTATE TAXES AND INSURANCE COSTS. INSURANCE HAS BEEN INCREASING OVER PRIOR YEAR AT AN INCREASING PERCENTAGE.