Brian Dano
NECPE:
It has become clear that some data was lost when we migrated from Catalyst to Moodys in 2024, as it is absent in the current NECPE data. We are working to rectify this issue; no ETA has been set. Furthermore, the product improvement committee discussed several things with the LeaseUp team and continue to have weekly meetings to keep pushing this platform to the future.
- Member Feedback
- AI search function inaccuracies (fixed)
- Inclusion of public record data (membership has been mixed on this; it will go to board for a vote)
- Discussion regarding private comps (this may or may not be against the terms of service)
- Old data is missing (as mentioned we are working to rectify)
- Ticketing Review Process
- We want users to be notified that their tickets are received and set expectations by which they will be responded to (in process)
- Roadmap Tool
- We are going to meet weekly to discuss what the users want and how to improve the tool. As always, feedback is not only welcomed but encouraged.
- SEO/AGO
- We are seeing the fruits of our efforts; traffic has been way up since we switched to Lease Up. The goal is to get real leads for our members listings.
Thank you for your continued support & patience, please continue to submit your feedback via the question mark icon, then select give feedback, so we can make this as useful a tool as humanly possible to you.
Higher Interest Rates Environment:
In September, the Federal Reserve raised its benchmark interest rate for the first time in three years and indicated another rate hike may follow before the year ends[1]. At the October Fed meeting, rates were held steady. The consensus as of this writing is expecting an increase, likely in December[2]. Interest rates will continue to rise in the short term.
Higher Interest rates hurt the CRE market in two ways:
- New Deals-Penciling Pressure
The typical 6 to 12 months between when a buyer signs a contract and when the sale is completed can make a substantial difference in financing costs when borrowing rates are rising as rapidly as they are now[3]. 30 yr Fixed Rate Mortgages were 6% in March of 2026 skyrocketing to 7.4% in October of 2026[4]. The fallout extends beyond property owners. Falling real-estate values and fewer sales squeeze property-tax and transfer-tax collections. Higher rates also make it harder for developers to earn their targeted returns. This in turn cuts demand for construction workers, architects, and building materials.
- Existing Deals-Floating Debt Reset
More than $5 trillion of commercial and multifamily real estate mortgages are outstanding. That is far more than Americans owe on credit cards ($1.26 Billion) or auto loans ($1.71 Billion) combined. Higher rates are also adding to owner distress as mortgages made when borrowing costs were lower come due. Owners that can’t refinance or repay the loans at maturity are falling behind or being pushed into special servicing. As of this writing, CMBS special servicing hit its highest level since financial crisis[5].
Who is the most affected by these two factors? It appears to be the Class A Multifamily market. These property owners face a bill of more than $1.8 trillion in debt over the next decade. From this year to 2028, about $757 billion of those loans are coming due, according to the Mortgage Bankers Association. That is the most of any commercial real-estate sector[6].
When apartment mortgage rates tumbled to historic lows of around 3% in 2020 and 2021, multifamily buildings were the hottest investment in commercial real estate. Office and retail properties suffered after urban downtowns were hollowed out by remote work. The lodging business took a hit when travel activity drooped during the pandemic, while soaring operating costs and plunging occupancy rates caused hundreds of senior housing facilities to close.
New apartment construction flooded the market, mostly concentrated in the Sunbelt region. Cities such as Phoenix, Denver, Atlanta, and Austin, were inundated with new luxury apartments without enough people to fill them. Fast forward, many of the same apartment landlords who were riding high are now preparing to sell at a loss, hand back the keys to their lenders, or reconfigure their balance sheets to shoulder millions more in mortgage payments after refinancing.
I know of a couple apartment buildings that are Class A in New England that were built in 2020-2021, including “The Chandler”, right next to my office on South River Road in Bedford NH. I reached out to their ownership, but they gave no comment. Public record shows a $27MM loan taken in September of 2021.
To that end, given New England’s housing shortage, and that for a while now it has been cheaper to rent than to buy, our Class A Multifamily rents have been increasing faster than elsewhere in the country. According to Only in Boston, typical rent in metro Boston is $3,074 per month, whereas a typical mortgage in the same area is $5,903 per month. So, in this example one would save $2,829 per month, or roughly $33,948 annually by renting. Contrast this pressure to renters and one can make the argument that rents can go higher in order to absorb any increased debt load by rates resetting.
What Now?
A couple weeks ago, in a smoke-filled room (Federal Cigar), the power brokers of Portsmouth assembled. We had just left the 100 Club after a successful joint NHCIBOR New England CCIM event. Thank you to all who attended! As attendees were a mixture of junior and senior real estate professionals, I sat with some of our more seasoned investors and lenders.
A conversation regarding lending came about, focusing on two main topics:
- Seller Financing/ Hard Money Interest Rates
In a high-interest rate environment it is my understanding that in the past buyers and sellers had to team up more to get deals done via seller financing. We at SVN are seeing this already, with several seller financing deals ongoing. The question at the table became “what interest rate”? I historically come from the camp that believes the rate should be higher than a traditional bank. Risk requires reward, as simple as that. The table agreed, and the hard money lender said the lowest he lends is 12%. An audible gasp went around the table, with traditional rates approximally 7.5% as of this writing; the conversation shifted to credit card interest rates. But the lender stated he felt 12% is cheap, given its after tax cost of debt.
- After-Tax Cost of Debt
For a high-income real estate investor, a 10% -12% interest rate may be considerably less expensive than it initially appears because interest paid on investment or business debt can often be tax-deductible.
The key distinction is between the nominal interest rate (what the lender charges) and the effective after-tax interest rate (what borrowing costs you after accounting for tax savings). Let’s break it down:
After-tax Rate = Interest Rate X (1- Tax Rate)
Givens:
Marginal Tax rate is 37%.
12% Interest only
After-tax Rate = .12 X (1- .37)
After-tax Rate = 7.56%
It is my understanding that this math assumes a full and immediately usable federal interest deduction. At the 37% bracket, the government effectively absorbs 37 cents of each deductible dollar of interest through reduced federal income taxes.
Here are some cautions with this application:
- Rental real estate losses generally cannot offset W-2 income or other nonpassive income unless an exception applies[7].
- Section 163J of the IRS Publication 527 can restrict business interest deductions. Many smaller businesses are exempt; the 2026 gross-receipts threshold is $32 million, subject to additional requirements[8].
- Acquisition, operating, investment, and construction debt can each receive different tax treatment. Some interest must be capitalized rather than deducted immediately.
- A 12% hard money loan with 2 points is more expensive than 12%, even after-tax deductions. The loan’s actual term and fee treatment matter.
- Being in the 37% bracket doesn’t necessarily mean every dollar of interest produces 37 cents of current tax savings. The deduction must be available and offset income taxed at that marginal rate.
Obviously, we as brokers need to advise our clients to discuss these factors with their accountants, as we are not qualified to be giving tax advice. The math here is to demonstrate how a junior broker who has known essentially free money most of their career can stay calm and advise their clients. Especially if they count as a “real estate professional”[9] in the eyes of the IRS, which may unlock this ability.
However, a tax deduction doesn’t make a bad deal good. You still must service the full 12% loan, even if the tax deduction is currently usable, tax savings do not necessarily arrive monthly when the interest payment is due. Debt service increases the risk of negative cash flow, refinancing failure, foreclosure, and loss of equity. The tax deduction does not materially protect against these risks.
Mid Terms- Will your Voice be Heard?
By the time this is published the November 3rd elections will have happened. I think it is imperative to discuss what is at stake. We are living in a tumultuous time. Artificial intelligence looms, conflicts in Ukraine and Iran impede global supply chains, and illegal immigration remains a lighting rod.
We at NHCIBOR have done our part; we met our RPAC & IMF goal. Thanks to all who donated![10] Both NH public policy committee (PPC) and NHCIBOR PPC work tirelessly to help lobby for bills that will help the real estate community and against bills that will put undue burdens on us as real estate practitioners.
Mid Terms- Final Note
I recently came across, Alexis de Tocqueville’s seminal work “Democracy in America” written in 1833-1840, showing, in my opinion, what made America unique right after its founding. I found his insights impactful in 2026. Tocqueville compared Europe to America and famously stated the following:
“The political associations that exist in the United States are only a single feature in the midst of the immense assemblage of associations in that country. Americans of all ages, all conditions, and all dispositions constantly form associations. They have not only commercial and manufacturing companies, in which all take part, but associations of a thousand other kinds, religious, moral, serious, futile, general or restricted, enormous or diminutive.”[11]. -Tocqueville
What Tocqueville states separates America from the rest of the world was our innate ability to band together to solve problems. Could it be that simple? I would challenge you to extend an olive branch to those who disagree with you. We should be able to respect each other as human beings, even if we can’t agree politically. “Every kingdom divided against itself will be laid waste, and no town or house divided against itself will stand.” -Mathew 12:25
[1] https://www.usnews.com/banking/articles/how-the-federal-reserve-impacts-savings-rates
[2] https://www.reuters.com/business/fed-skip-october-raise-rates-again-december-nearly-all-economists-say-2026-10-20/
[3] https://www.wsj.com/real-estate/commercial-real-estate-interest-rates-22d04b1b?mod=real-estate_feat2_commercial_pos5
[4] https://fred.stlouisfed.org/series/MORTGAGE30US
[5] https://therealdeal.com/data/national/2026/cmbs-special-servicing-peaks-since-financial-crisis/
[6] https://www.wsj.com/real-estate/apartment-landlords-have-a-2-trillion-debt-problem-that-is-only-getting-worse-6a096162?mod=Searchresults&pos=2&page=1
[7] https://www.irs.gov/publications/p527
[8] https://www.irs.gov/newsroom/questions-and-answers-about-the-limitation-on-the-deduction-for-business-interest-expense
[9] https://www.irs.gov/publications/p925
[10] https://nhar.org/nhrpac-imf
[11] https://www.libertarianism.org/essays/associations-civil-life
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