K. J. Dunham of the WSJ says individual investors (properties under 10MM) have less competition in acquiring investment properties now. This window of opportunity is due to many larger investment firms taking a wait and see approach because of recent changes in the credit markets. This means less buyer competition for investment properties under 10 million. How long will this last? No one knows but it may offer opportunity to buy certain net lease properties for a short period of months with fewer buyers and better prices.
What now? RCAI's tracking of Cap rates for CBD Office and Apartment properties in the US projects Office (5.86%) and Apartments (6.08%) Caps are now less than a point above the 10-Year Treasury. For the individual investor this may be an interesting statistic, but probably not a signficant statistic for investment target properties under $5MM. In fact, slightly higher Caps are appearing on some credit tenant net leased properties under 5MM. Stay focused on the location and type of your next target investment where Caps are still resonable. We are seeing more room in Cap rates at the moment, due in part to the uncertainty in the market and the Fed's highly visible decision making. The underlying US economy remains very strong and is the envy of the world. As Winston Churchill said before WWII, "this is not the beginning of the end, it is only the end of the beginning". Pick you target and achieve your Cap. Have a great day today.
Include federal income taxes in your analysis of investment return over the hold period in your real estate investment. Some no federal income tax states also may offer the most attractive investment property prices as well. Buying your next investment property in a no income tax and lower development cost location may add to returns at disposition. True ROI at sale is the key measure of your investment.
Every individual investor in investment grade real estate is unique. The differences include unique investment goals, property types, hold times, location preferences, Cap return targets, price and tenants, among other specific investment needs. We take assignements (to sell or buy for you) only after we gain a clear understanding of your investment or disposition goals. We have to get to know you and what you want to accomplish in the transaction first. Takes a little more time this way, but it leads to success for you in meeting your own unique and indivudual investment goals. And, it's a lot more interesting and fun!