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n. Illinois | The Commercial real estate market is going to get seriously hurt as the loans made in 2020-2021 at the low Covid inspired interest rates start to come up in the next couple years.
The properties will be reporting lower rental income and the cost of capital is going to be higher. The actual costs to own and operate will be higher so the net cash flow takes a dramatic downturn. Which results in a lower valuation for the property. Bank thought they had a loan/av of 65% find themselves at loan/av of 130% and a property that does not cash flow. The rich dudes who own the LLC that is the legal owner and who promised to guarantee the debt will walk away and allow the bank to take the property bank Bank will sell property at a discount and take a huge loss. The rich dude will not be pursued for the deficiency because almost any lawyer can defeat a guarantee in court. This is how it starts and spirals out of control until the Fed's step in and do the print trillions of new money and drop to zero interest rate play once again. Sending inflation into the way higher than 9% for the 2nd go around. Now if someone would just tell us the actual timing so we can all get wealthy and be cursed as the 1%. | |
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There will be bank failures caused by commercial real estate losses
