“Get me 3% cash on cash and I’ll buy”.\u00a0\u00a0 “Find me a true 6.5 cap rate deal and I’ll buy”.\u00a0 “Show me 25% to 30% downpayment with a slight cash flow and I’ll buy”.\u00a0\u00a0 These and many more comments are being given to me by many buyers trying to get into this market place.\u00a0 Are they unreasonable in their wishes?\u00a0 No, not\u00a0 at all.<\/p>\n
People are talking about the slow down of sales not only in residential housing, but in commercial real estate in general.\u00a0 What you don’t hear much about is the demand that is becoming pent up by buyers hoping to invest in commercial real estate.<\/p>\n
When dealing in homes we all know there is a dearth of buyers because home prices are still declining.\u00a0 Why buy a home that will almost assuredly be worth less in a year from now than it is today?\u00a0 Good question with no especially great answer forthcoming.<\/p>\n
Dealing in commercial properties is really a different matter even though it is being shoved into the same\u00a0basket as housing.\u00a0 People are really afraid to go into the stock market.\u00a0 Every day there is more bad news regarding stocks and the economy.\u00a0 Every day another captain of industry bites the dust albeit with a\u00a0 severance package most would kill for.\u00a0 The investor has very good reason to fear where the market is going in the next 12 months or more.<\/p>\n
Commercial real estate does not have those great drops in value or battered returns.\u00a0 True, some office buildings are getting smacked with vacancy rates that have risen significantly in the past year. However, even in those cases most have such a cushion built in them that we have not seen even this catagory of commercial property going into foreclosure.<\/p>\n
Then why the slow down?\u00a0 It’s simple.\u00a0 Property owners have been doing so well with their properties in the past 5 or 6 years that they aren’t pushed to sell.\u00a0 However, if they really wish to they can sell easily by simply allowing the buyer to achieve a modest return.\u00a0 This isn’t really a very painful or costly move for most sellers.\u00a0<\/p>\n
The fact is that by pretending this is still 2004 or 2005 they are missing an extraordinary chance to take some significant profits.\u00a0 They are betting the farm that the market will go back to rapid run ups in value in a year.\u00a0 In my view that is very unlikely to happen at least for a few years.\u00a0 Investor psyches have been severely impacted by what has been going on in the economy in general.\u00a0\u00a0 They have learned a very hard lesson, once again, that they simply cannot get sloppy or emotional when investing their money.\u00a0<\/p>\n
The encouraging news is that more sellers are starting to realize that even though their property is not worth the pie in the sky number they have attached to it, it is still worth a hansome price.\u00a0 If this idea continues to take hold we will once again be back in a market that is more than fair to the seller and gives the buyer a reason to invest in real estate.\u00a0 Hang on because I think we are getting there.<\/p>\n","protected":false},"excerpt":{"rendered":"
“Get me 3% cash on cash and I’ll buy”.\u00a0\u00a0 “Find me a true 6.5 cap rate deal and I’ll buy”.\u00a0 “Show me 25% to 30% downpayment with a slight cash flow and I’ll buy”.\u00a0\u00a0 These and many more comments are being given to me by many buyers trying to get into this market place.\u00a0 Are […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[30,37,39,40,47,53,59,62,63,91,110,133,147,170,173],"class_list":["post-26","post","type-post","status-publish","format-standard","hentry","category-trends","tag-buyers","tag-cap-rate","tag-cash-flow","tag-cash-on-cash","tag-commercial-real-estate","tag-dealing-in-commercial-real-estate","tag-demand","tag-downpayment","tag-drops-in-value","tag-investor-psyches","tag-modest-return","tag-property-owners","tag-reason-to-invest","tag-significant-profits","tag-slow-down"],"_links":{"self":[{"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/posts\/26","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/comments?post=26"}],"version-history":[{"count":0,"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/posts\/26\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/media?parent=26"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/categories?post=26"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/tags?post=26"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}