How the September 17th Fed Meeting will affect the RV park sale prices and certainty of closing
The economic landscape has evolved significantly since March 2020, also known as the last time interest rates weren’t increased or held steady. With many experts hinting at a potential rate cut in next month’s Fed meeting, RV park sellers and buyers are left wondering, “RV there yet?”
Under current market conditions, the feedback we receive from sellers and buyers is consistent with the following:
Impact of Current Interest Rates on Pricing and Certainty of Close
Higher Borrowing Costs: Elevated interest rates lead to higher mortgage payments, which can reduce the property's value as buyers may need to offer less to maintain profitable margins.
Lower Certainty of Close: With more expensive financing and risk averse banks detouring from specialty properties like parks, 75% of deals are falling out of contract that are contingent on securing bank financing.
Increased Cap Rates: Higher interest rates generally raise capitalization rates, which can result in lower property valuations, discouraging sellers.
Potential Benefits of a Rate Cut
Enhanced Cash Flow Projections: Lower interest rates reduce debt service, improving cash flow and allowing buyers to justify higher offers, which can align with the seller’s expectations, increasing deal closure chances.
Attracting More Investors: A lower cost of capital makes the investment more appealing, drawing in more buyers and creating competitive bidding, which supports property pricing and closing certainty.
Easier Loan Approval: Reduced rates can improve debt coverage ratios, making it easier for buyers to secure financing, which accelerates the closing process.
To discuss these factors further, contact our team at MHRV@partnersrealestate.com
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