The calendar just changed to September and everyone is changing their focus. Some are gearing up for school. Some for football. Some both (me)
The weather is about to change, along with the colors on the trees. Time to change that wardrobe a bit too.
Something else is also changing. People are refocusing what they do this time of year, and one of those things is often NOT looking for houses or commercial real estate We all have priorities, and sometimes things slip off the lower end of that list that just never seems to get done (my lists grow, never shrink). So, what’s my message to you?
I get asked this question almost daily. In short the root of the question is what is a good buy in the market right now. Most often the answer is not what anyone expects. Most people expect me to say what they have already heard around town. That is rarily what is the best investment in the market currently. Why? Simple. Supply vs. demand. As demand for the asset goes up, so do the prices, bringing return rates down. For example, multi-family properties. Right now in our market, they are HOT, too hot. The national average for a multi-family cap rate right now is 5.5%!!!! Still, I have more requests for multi-family units than anything. So I tell people to stay away from multi-units. As the condo’s can’t sell and get converted into multi unit rentals, you can expect pretty much the same. I mean the developers have to make some money some how right?!?!?!
If you are either new to commercial real estate or just looking to get in to the game, first of all, welcome.
Secondly, you’re going to have to forget some of what you learned as a residential investor.
Do you remember how you first started looking for houses to buy? Did you start to notice the vacant houses that you weren’t seeing before? Sure the board-ups were easy. Then came the ones with tall grass and newspapers that were 3 weeks deep in the driveway. Then came the broken shutters or window. Then you felt you could just “tell” that a house was vacant, even if these blatant signs weren’t as readily apparent.
With the crash of subprime lenders, homeowners are going to struggle to sell their houses. Harry Homeowner and Betty Buyer are going to be denied a new home loan for 90-95% of the loan value left and right, simply because these ARMs, interest only (I/O) and other exotic loan products are drying up.
