Credit and lending cycles: when’s the right time to act?

July 16, 2018 | Blog | Buyers | Sellers

You’ll boost your return on investment when you learn how to spot favorable cycle conditions

When you have a multifamily investment, it’s important to take advantage of strong rental market conditions. But that’s not all: it’s also incredibly important to take advantage of the credit and lending cycles that also run in the commercial real estate world.

What does the right time look like?

The best time to act is when lending is easy and readily available, interest rates are low and there’s plenty of liquidity in the marketplace. If you’re selling, you should take advantage at this stage of the cycle because your buyers have full access to cheap, easy debt. If you’re planning to hold your asset you may want to consider refinancing, you may be able to lower your payments, or even lock in a long-term low-interest rate.

Either way, it’s important to take advantage of the credit cycles that exist in investment real estate because they oscillate. Just as credit loosens up and tightens up, liquidity in the market also loosens up and tightens up in a cycle. When the cycles are advantageous for you, you should act quickly. Otherwise you’ll miss out on those opportunities as the market tightens, credit limits tighten and liquidity decreases.

Check the cycles often

As a rule, you should check these credit and lending markets every six months to see what’s available in the market.

“I would strongly recommend anyone with a balloon payment coming due or a refinance pending within the next 48 months to look at the available lending today,” says Joe LaFleur, multifamily investment advisor at “Today there is so much liquidity in the market and credit is so readily available that it’s likely to your advantage to look now. That way, you’ll know if you should refinance right now or sell right now. Because the market is currently in your favor, it’s important to take advantage of the tailwinds in the marketplace while they are there.”

What does the future hold?

While the future of real estate remains uncertain, one thing’s for sure: the market is very good right now. Assuming your debt is at a higher interest rate, our experts recommend taking full advantage now to increase the cash flow on your asset.

Another way to keep ahead is to put long-term debt on a property that you intend to keep. This way, you don’t have to face down a balloon in the near term that may come when the credit cycle is not as advantageous as it is right now.

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