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This past week, the 10-year yield broke up through the 3.05% resistance.  Below you will see a 5-year graph that shows we are now at the highest point in the last 5 years.  For many, the 3% yield was a psychological limit.  However, for those of us that are more chart oriented, this break through the 3.05% mark is more impactful.

Note that we had been in a down trending interest rate market from late 1981 to mid-2016.  Since that point, we have been trending upwards.  Although rates are historically low, many people felt that rates were going to remain low forever.

One additional thing I noticed is that the US 10-year does not seem to be affected as much as it has been by the German Bund 10-year (see both graphs).  For quite a while, it appeared that the German Bund was helping keep our rates low.  However, this perceived relationship has changed.

Like most variables in our economy, interest rates do not move in a vacuum.  We have had tax rule changes, an economy that many feel is improving, some inflation, and now we have been seeing oil continually increase.  What this all means is anyone’s guess.  However, I would suspect some clients will be trying to time the market and looking to sell right now.

Due to the nature of what most of us do, clients will be wondering what is going to happen next.  All we can do is educate, and then provide the best advice and guidance.

Investments Opportunities for Purchase with Strong Cash Flow:

Back on the January 15th update, I wrote about “Creating Residential Listings Using Commercial Opportunities.”  Each week,  I am presenting some of those investment opportunities to better educate all on what is actually available.  Note that these are all Single Tenant Net Leased properties that have listed in about the last 10 days.  In addition, I assumed a 5% loan with 50% down.  This is just a small sample of what is actually available.

If you assume investors in the Bay Area are getting a cash flow of 3.5%, then you can see the potential improvement with these properties above.  This approach is great for the investors desiring increased cash flow, an opportunity to get out of daily property management, and/or taking the challenges of rent control off the table.  Should you wish to discuss any of these or others, then give me a call.

That’s it for this week.  As always, feel free to give me a call with any of your strategic financing needs.

Articles of Interest:

CNBC reported “Market now pricing in four interest rate hikes this year.

The Wall Street Journal reported “California Apartment Landlords Dump Properties Ahead of Rent Control Vote.”  Note this requires a subscription to read it completely.

The SJ Mercury News reported “One woman’s plan to solve the Bay Area’s housing problem: 10,000 tiny, backyard homes.”

Fortune reported “How Seattle’s New Tax to Fight Homelessness Could Ruin Its Economy.”

The SJ Mercury News also reported “After a real-estate deal that triggered $1,000 rent hikes, Oakland families face eviction.”

See the table below for approximate interest rates.
Type Rate Fixed Term
Apartments 4.575% – 5.100% 3 to 10 year (30 yr amortization)
Commercial 4.885% – 5.400% 3 to 10 year (25 yr amortization)
SBA Lending Call for Options Call for Options