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Buying Loans for Commercial Property
Posted on 5/5/16 at 3:03 pm
Posted on 5/5/16 at 3:03 pm
what does the board think of this idea.
Buy up properties at sub-par cap rates with assumable loans with 10 year notes. When the interest rates go up, sell the loans off at the % of increase. The property will then be worth more to be able to get the same return off a higher interest rate.
Buy up properties at sub-par cap rates with assumable loans with 10 year notes. When the interest rates go up, sell the loans off at the % of increase. The property will then be worth more to be able to get the same return off a higher interest rate.
2
Posted on 5/5/16 at 3:38 pm to buschlitepapi
quote:
The property will then be worth more to be able to get the same return off a higher interest rate.
Go a little deeper here so I can tell you how you're wrong.
Posted on 5/6/16 at 12:55 am to buschlitepapi
quote:
Buy up properties at sub-par cap rates with assumable loans with 10 year notes. When the interest rates go up, sell the loans off at the % of increase. The property will then be worth more to be able to get the same return off a higher interest rate.
What? First of all buying things at "sub-par cap rates" means you're paying more for it. Second of all, if interest rates go up, technically property values will go down because cap rates will increase. Value = income/cap rate. Therefore, if cap rates go up (assuming income stays the same) value goes down.
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