Will Political And Economic Factors Impact Commercial Real Estate Loans?

There has been a tremendous amount of upheaval over the past year in our national environment. With the continuing political transition and the compounding economic impact, it is difficult to tell exactly how the real estate market will be affected, however, one thing is certain: borrowers should beware of the impact on commercial real estate loans.

It is no secret that the domestic landscape of the United States is, and has been, undergoing a change. Politically, there has been a widening divide that is having ripple effects throughout other sectors of daily life. As the country seems to become more polarized, not only are voting blocs redraw and hardened, but economic trends are also shaken.

The political turmoil affects a number of things, from consumer confidence to foreign investment funds flooding into domestic markets. So, while the nation has been on an upward trajectory for a number of year, and that does not seem to have stalled with the election of Donald Trump, the undercurrents of property investments and commercial real estate loans do not necessarily follow these trends.

These political trends and the uncertainty do, however, provide hidden opportunities for investors and borrowers who study the market careful and choose their investments wisely. While no venture is entirely without risk, by knowing the political climate and the economic factors that are impacting each local area, you can find ways to make money with commercial real estate loans even if the market might be taking a downward turn.

One of the largest economic factors on properties is the work force. While commercial real estate does not deal in residential free-standing housing units, the fortunes of one are definitely tied to the fortunes of the other. In depressed areas, with lower median incomes and less opportunities for employment or sustained growth, there is likely to be fewer single family homes, due to the cost of purchasing and maintaining such an investment. This provides an opportunity for commercial investors to enter the market and provide multi-family housing units. People who live and work in a local area still need a place to call home, even if they cannot afford a free-standing residence. So, if you are a borrower looking to capitalize in a depressed area, it might not be a bad idea to take out a commercial real estate loan in an attempt to provide housing.

What economic factors lead to a decline in residential housing and threaten the success of commercial real estate loans?

One of the biggest influences of a declining residential market is when wages are not able to keep up with the rates of inflation. Many families suddenly find themselves on the wrong side of the curve and are unable to keep up or save for mortgage payments. That is if they are able to keep their employment at all. On top of this, as the economic situations in many areas declines, lenders often become more restrictive as defaults tend to rise. Keep in mind, however, that such economic downturns do house within them the opportunity for smart investors to utilize commercial real estate loans to increase their bottom line.

 

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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