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The 10-year yield continued its upward trend last week.  The exuberance in the stock market (most likely from corporate tax reform) seems to be opening the door for higher interest rates.  Looking at the graph below, you can notice that we are getting quite close to the two-year high.  With interest rates rising here and over in Europe, it appears the upward trend may just be beginning.

Commentary – Teams to Better take Advantage of Opportunities

With the supply of available properties continuing to dwindle, concern is increasing for the real estate related professions.  My suggestion to all is to get better at spotting opportunities when they arise.  And, then it is crucial to know how to help clients solve whatever problem exists for them.  Professionals that take this approach will still be able to flourish as they will be seen as providing a valuable service to their clients.

I will provide a quick example of a way to create more listings by solving a problem for your clients.  In this example, the client owns a single-family home investment property.  Their cash flow for the property is not bad, but it is low to what they could ultimately earn if they were able to do a 1031 exchange.  The problem is they do not feel there is a suitable replacement property.

So, let’s do some quick math.  Assume the property is worth $1,000,000 and has no debt.  And, let’s say it would rent for $4000 a month.  That equates out to $48,000 a year.  I will also assume about 25% in expenses.  Therefore, the net operating income is about $36,000.  That would be a cash on cash return of 3.6%.  Now that is not bad, but they do have the responsibility of managing the property.

What if you could show them a way to earn $60,000 a year with no management responsibilities?  Would that help you gain more potential listings?  I will tell you that I know many taking this approach.  Clients are unaware that these opportunities exist.  That is why it is so important to build virtual teams.

If this example is of interest to you, then I recommend you give me a call and let’s sit down.  These opportunities exist in the commercial market.  Just knowing it is an option should open some doors that perhaps were being ignored in the past.

That’s it it for this week.  As always, feel free to give me a call to discuss this approach or to answer any of your strategic financing questions.

Articles of Interest:

CNBC reported “That 20 percent tax break for small businesses is no free-for-all. How to navigate.”

The Registry reported “Will California’s Cannabis Real Estate Markets Copy Colorado?

See the table below for approximate interest rates.

 

Type Rate Fixed Term
Apartments 4.205% – 4.850% 3 to 10 year (30 yr amortization)
Commercial 4.535% – 5.150% 3 to 10 year (25 yr amortization)
SBA Lending Call for Options Call for Options