Self storage loan interest rates mortgage,dovetail jig woodworking plan pdf,steel building prices online,woodworking plans ironing board - Tips For You

30.05.2014
This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. If you’re a self-storage owner, here’s a question you may not be answering correctly: What is my largest expense item? Here’s the point: Interest expense and interest rates need to be managed and controlled just like any other expense.
This article will examine these trends and provide a brief overview of what influences them.
The Prime rate is the interest rate charged by banks to their most credit-worthy and stable customers.
The Prime-rate trend over the last 10 years shows we are (at the time of this writing) at 4 percent, after dropping over the last few years as the Federal Reserve Board lowered the Fed-Fund Rate in an attempt to stimulate the economy. For those self-storage owners who are currently borrowing funds using a variable-rate loan based on the Prime rate, the impact has been extremely positive to your interest-expense line.
A possible action point for self-storage owners is those of you who are currently financing your facility using a floating Prime-rate loan may want to consider refinancing and locking into a fixed-rate loan. Interest rates on fixed-rate 10-year loans are priced relative to the yield on the 10-year Treasury Note.
Unlike the Prime rate (and the Fed-Fund Rate), the Federal Reserve’s monetary policy does not have a significant impact on the Treasury yields.
Over the summer, I had a number of questions and concerns about the long-term interest-rate trends.
The belief that the Federal Reserve Board would use “unconventional” stimulus measures to keep long-term rates down.
While the fear of deflation was fashionable, it was really not a risk for the national economy. As with the Prime-rate forecast, the yield on the 10-year Treasury note is expected to rise. In an article in Forbes as far back as March 2003, it was noted that “Professionals overwhelmingly forecast a big move up in both long and short-term rates this year.” The forecasted rise is also not unreasonable when you compare the forecast to the historical trends over the past 10 years.
The impact in interest-rate trends over the last 10 years has been extremely positive for the self-storage owner in that long-term borrowing rates have trended down. If you currently have a variable-rate loan, or if you have been considering refinancing your current long-term loan to lock in a lower rate and improve your cash flow, a possible action point is to consider converting to a fixed-rate loan. Using these assumptions, you see the interest rate on the variablerate loan is lower for the first five quarters, then exceeds the interest rate on the fixed-rate loan. A variable-rate loan may be right for you, especially if you plan on paying it off in the next few years. The above example considers only a few of the variables that should be taken into account when evaluating your financing strategy and managing your interest expense. Home Entertainment How to Analyze Investment Property - The Worksheet - YouTubeMay 24, 2011 .


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DISCLAIMER: Sender is not a United States Securities Dealer or Broker or United States Investment Adviser. Don’t think of interest expense as “fixed” or “uncontrollable.” To that end, a better understanding of interest-rate trends (historical and expected) and their impact on your bottom line can help you better manage this task. Both fluctuate due to somewhat different factors and often produce differing trends—short- as well as long-term. I will also provide a forecast for those of you who may be considering getting into the business, as well as those thinking about refinancing an existing loan. It is interesting to note in June 2000, the Prime rate was at 9.5 percent and stayed at this rate for almost nine months.
For example, if you had a $2 million loan at the December 2001 Prime rate plus 1 percent (or 6 percent) compared to the August 2003 Prime rate plus 1 percent (or 5 percent), you would be saving $1,130 per month when using a 20-year amortization schedule. 15 Prime-rate forecast, prepared by a major East Coast lending institution, Wachovia Corp., was developed by analyzing past trends and the underlying causes of those trends, then applying those economic models to the future. Those of you who are considering entering the business should probably budget a higher interest expense for your construction loan to reflect the anticipated increase in rates. It is usually stated in terms of the 10-year Treasury yield plus a lender spread of X percentage points.
While those few months were nothing more than a small blip in the chart, the trend is worth reviewing in a little more detail. The real story is the drop in yield to the June 2003 low—and what happened to cause the rate to drop to its lowest point in more than 45 years.
This forecast, also prepared by Wachovia, reflects the expected growth in gross domestic products and the expected rise in inflation as the economic recovery shifts into a higher gear. The actual spread a borrower obtains is based on many factors and can vary from this example by as much as plus or minus .5 percent.
Although the Prime rate is expected to stay flat until early 2004, the longer-term 10-year Treasury is already moving north. The first one reflects taking out a variable-rate loan at Prime plus 1 percent in the third quarter of 2003.
With these historical interest-rate trends and the related forecasted trend, you can now evaluate the best financing alternative based on your personal needs and long-term financial strategy.
Or knowing that the general consensus is short- and long-term rates are headed up, the timing may be right to obtain a fixed-rate loan and not take the risk of short-term rates rising back their levels of most of the last 10 years.


Being aware of interest-rate trends (historical and expected) and understanding some of the key drivers behind the fluctuations will help you make better informed decisions about your financing strategy and ultimately give you better control of your interest expense.
This form is designed to estimate the first year's benefits of the real estate investment. Tweet TweetAn investor who gets the entry right can forget the rest, especially when it comes to real estate. The typical rate for a self-storage construction loan is Prime plus 1 percent (based on the borrower’s credit). In recent history, the Prime rate has changed directionally as the Federal-Funds Rate (the rate charged on overnight loans between banks) has changed. However, the reverse— paying $1,130 more per month—could be true when you look at a forecast of the Prime rate out to the first quarter of 2005. Because the forecast represents the average experience in the past, there is significant room for error.
However, the primary drivers—especially over the last eight months—have been expected growth in the economy (gross domestic products) and expected inflation. The following graph shows a dramatic spike in the 10-year Treasury yield from its low in June 2003. The result, however, appears to have been a temporary “mis-pricing” of the 10-year Treasury yield.
Overlaying the Prime-rate forecast onto the 10-year Treasury-yield forecast, the graph points out the timing differences in expected increases, with the Prime rate projected to exceed the 10-year Treasury yield in early 2005. The second assumes taking out a fixed-rate loan for the same amount and date at the forecasted 10-year Treasury yield plus 2 percent.
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In addition to construction loans, self-storage owners will occasionally obtain a Prime-rate loan as a form of “permanent” financing and will assume the risk of rate fluctuation. In simple terms, the Federal Reserve Board lowers the Fed-Funds Rate during recessionary periods to help stimulate the economy, and raises the rate when it thinks there is concern for inflation. The 10-year Treasury graph reflects a dramatic downward trend in the yield over the past 10 years. In other words, the recent jump in yield and long-term lending rates is more like a return to normal.



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