Had a call from another owner, seeing if we wanted to sell any of locations.  Said no.  Then had a long conversation.  Asked him about loans and he said he was in the low 6.x%.  Last time I checked it was 8.25% to 8.5%.  Decided to contact our 3 banks and see where they are at. All of them were at the lower rate, but with us as an existing customer.

Existing Loans;

One of our current loans is at 5.25% on a 7-year balloon, with 3 years left.  With a 20-year amort.  Asked them to look at early refinancing at 6.25% or 6.5%; with a 7-year balloon and a 15-year amort.  He is also going to see if he can do a 10-year balloon period.  Keep in mind we have done business with them since 1993, and they are a family friend for over 70 years.  

We actually did an early refi on the above loan before.  Rate was around 4.x% with 2 years left on a 5-year balloon term.  I have been concerned about coming to the end of a balloon period and getting caught with a high rate at the time.  So refi'd early.  The Bank President bumped us from a 5 to a 7-year balloon term, locking in the rate longer.  

The above is about Risk management and our outlook.  I picture interest rates going really high (12 to 15%) in the next several years, so we don't mind the 1%-point increase to lock in rates for a longer period.  Am I right?  Who cares.  Develop a pan/outlook then work towards it.

Our second loan is via the SBA.  We won't touch this and will pay thru maturity.  10% downpayment our way.  Then 45% thru SBA and 45% thru local contracting bank.  The SBA portion is on a 20-year amort fixed rate with no balloon.  The Local bank is on a 20-year amort with a 10-year balloon fixed rate, then 5-year review periods after that.

New Deal $2.6mm:

When rates hit in the 8% range, I turned my Deal brain off.  Won't do deals at 9% or higher.  With rates in the mid to lower 6.X%; pulled a deal I had in the drawer and stopped due to rates being too high for us.    Updating the Deal analysis, following up on a few costs.  If it falls together, will do a post on the process start to finish.  This would be a 200% Cash on Cash deal if it works out, after a 3-year period.  Normally we are in the 400% range, but the land is larger than we want.  We may need to see if we can add a higher value add to the property to fully use the larger site.  This is also a Low-Risk deal for us from both a development standpoint and an abnormally Strong Market analysis, so the lower return is okay.

Start small and Make Your Big Mistakes Early.

It's your Money, Your always Right.