Interest rates for commercial real estate loans have jumped considerably. In May 2103 the interest rate was 4.14%. In September 2013 the rate has increased to 5.7%. These rates are indexed to the 10 year treasuries. Under normal circumstances rising interest rates would cause a decrease in the value of commercial real estate. This has not occurred because the interest rates were, and still are artificially low and there is still upside potential for investment in commercial real estate.
The government has kept interest rates artificially low in order to stimulate the economy. The government achieves this by purchasing bonds. The reason that interest rates jumped recently is mostly due to the fact the Federal Reserve indicated that they may at some point slow down on their purchasing of bonds since the economy is improving. The jump in interest rates illustrates how sensitive the market is to the mere hint of a policy at the federal level. If the rate of bond purchases by the Federal government does indeed decrease we can expect that interest rates will rise even further.
It is still an excellent time to purchase Florida investment properties. Even with the recent increase in interest rates the cost of financing is relatively low. Timing is an important factor in real estate. Astute investors can still profit from advantageous market conditions. For investors or users that have been sittiing on the fence it is a good time to act. Contact us at FIRE if you have an interest to purchase commercial real estate in Florida.
Florida Investment Property