Monday, November 26, 2007

New rules 1-5

What does the "credit crunch" mean for a local entrepreneur? Someone who wants to buy a 12-plex apartment house, or a gas station, or an office building?

It means a lot of things: it means we run an increased recession risk, as some of the big companies are dancing on the edge of bankruptcy. It means that if you have the nerve to buy while prices are falling, you can get into some very good deals. It means that some lenders are running away from you and others are running towards you.

But in short summary, here are the new rules 1-5 for what it means:

Rule 1: Make sure your debt is structured in ways that make sense for you.
Rules 2-5: See Rule 1.

Let's say, for instance, that the cash flow of your property is just okay. If an economic turndown means that you could be losing money, you should investigate a rate/term refinance. We have some 30-amortizations that can increase cash flow.

Let's say you need to free up some operating reserves. If you can lock in a good payment for 5 to 7 years now, and still free up cash, now's a great time to do that.

In my own opinion, the worst thing you can do is to hold on to an adjustable rate commercial mortgage. If property values fall, you may not be able to refi out of it.

Take a look at your payments now and make sure that the loans you're in are the loans you can be in for another 3-5 years. If not, call me today.

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