Is now the right time to start investing in Real Estate?
Groundbreaking Real Estate, LLC
Providing real estate investors with above market returns, and capital raising for syndicators.
Investors often ask me, "Is now a good time to invest in real estate considering high interest rates & the uncertain economy?
....the short answer is that now is always a good time to invest in real estate...but it has to be the right deal.
Here are 3 key things to look for in an uncertain economic environment:
1) Debt leverage: Bank debt historically has been 60-80% of an acquired deals total value. However, in this current environment we prefer to see less leverage (50-65%). This protects investors if the valuation goes down, or cash flows become lower than expected.
2) Debt rates: We are generally only looking at investments with locked in (longer term rates). The fixed rate should be for at least 5-10 years to ensure the project is able to reach stabilization, and we can exit without the risk of rates going up.
3) Current cash flows: In the past, we may have invested in deals that had 3-5% net operating cash flows, so long as there was higher value-add opportunity, and appreciation potential. However, these thin margins create risk in the deal if the economy is disrupted. Instead, we now look for deals that have higher net cash flow (6-8%), even if it means lower potential valuation upside at exit.
Contact Groundbreaking Real Estate, LLC if you want to chat more about how you could more safely invest in real estate in this environment.