I heard this term recently about a build up rate. Apparently its the combination of each risk associated with an RE investment, expressed as a percentage. Including the risk free rate (~10yr tb) in the calculation. I can't find anything online regarding the term and it's significance though. Only one website that basically lists the same definition I used above.
Anyone know anything about it?
So a "build up rate" would just be the overall rate that goes into a deal. This build up rate when lending out to a developer is typically the US Treasury 10 year [Or whatever is the index rate] + The company rate spread + Forward Contract Premium.
Why this is important to know from an equity point of view is because a lender typically won't change their spread or the forward contract premium (unless there's a driving reason to). The only item that would change is the US Treasury 10 year. If you think rates are going to go down next week, then you can wait a few days to lock in a rate to recieve a discount.
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