Protecting Yourself In This Market.
Dan Genzel
Building a cumulative investment & commercial real estate portfolio to $100 Million and helping others do the same. The content I share ?? is about the process. More ???? multiplycapital.com
Here’s a question I get almost on a daily basis…where are we at in this real estate cycle?
Prices for commercial real estate appear to be cooling off in many markets. Cap rates aren’t dropping like a hammer…but what does this mean?
I wish I had a crystal ball but the question still is: Should you wait this market out if you are a seller or a buyer of investment real estate?
A really big question you need to ask yourself if you’re a long term or short term investor.?I rode out the great Recession with some assets that have regained all their lost equity in 2010 and then a lot and i mean a lot more.?But a short-term strategy didn’t turn out so well.
But are you really that good at timing the market.?Last go around experts didn’t know where the bottom of the market really was.?Your truly just held my nose and bought when it felt right and everything turned out.
About this time of the year, I look at the assets and ask myself...everything else being equal, would I buy this property again? is there still upside to squeeze out? Do I think the rent roll is still in good shape? If the answer is no I will look to unlock the equity and redeploy. If so I relook at it next year.
Do you want assets sitting around earning little or no return until the market reaches bottom and the next "buying opportunity" occurs?
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If you can't sit on investible funds and wait it out, what do you do?
Personally, according to my investing strategy, I think the way to look at it is…you avoid short-term appreciation-focused strategies that require you to time the market.?You focus instead on long-term cash-flow-focused investments.
In other words, you avoid strategies like ground-up development or major rehabbing and repositioning that require you to sell or refinance in what could be dramatically worse market conditions.?Instead, you focus on acquiring assets whose in-place cash flow will permit you to ride out the end of this cycle and sell at an advantageous point in the next one.
And, yes, if the market declines, asset values will decline, and you'll suffer unrealized losses on your assets.?But, as long as you don't sell, those losses will never be realized. They will be made up in the next upswing.?And, in the meantime, you will be earning returns on your money from the property's cash flow.
My best,
Dan Genzel