Timing The Market: Commercial Lenders
The old adage in investing “buy low and sell high” has its value not only in the stock market, but in real estate as well. Commercial lenders looking to make a substantial return on their investments in commercial real estate know that it is all about managing risks. Understanding and gaining knowledge on real estate cycles helps investors manage risks and make substantial gains. The real estate cycle is a tool for investors to use to calculate when and where to enter the commercial market.
Real estate cycles work like a traffic light, and given the economic environmental conditions one can interpret the state of the market as a green, yellow or red light.
- Green Light: Environmental factors that might hint toward a “green light” for commercial lenders and investors include upcoming job growth due to a rise in factory employment. Alternatively, one might find that the demand for construction exceeds the supply of available properties. Most likely, one will also see a lot of undeveloped land sales activity.
- Yellow light: A “yellow light” might be indicated by interest rates climbing steadily or a rise in vacancies and an increase in “lease sales”. This could led investors to take a step back and examine the costs to borrow new money.
- Red light: A “red light” may be indicated by by a slow-down or halt in construction. This could be the result of over building in an area, creating a surplus in supply over the available demand in the commercial real estate market.
Reading these sign can enable investors to identify opportunities in the market and provides insight into decision making factors leading to a decision to buy, hold, or bottom fish.
Contact the specialists at HML Investments today for further information regarding financing from commercial lenders.