Income Property Services A.G., Walnut Creek, California. Complete commerical real esate and investment services.
Income Property Services A.G. offers services above and beyond that of typical brokerage firms and strive to include changing technology and industry innovations to better serve our clients.
INVESTMENT PROPERTY INSIDER
Product is Now Hard to Find
It was not very long ago that many people in the investment real estate industry were predicting a “tsunami” of commercial real estate foreclosures that would cripple the market, drag down the economy and decimate values. For most investors who own real estate in the Bay Area, that extreme prediction never materialized and we are now working in a market that has very little available product with strong demand in all product types. How could we have moved so quickly from a weak investment real estate market to one where product is so highly sought after?
- The Bay Area continues to experience job growth and positive economic news in nearly all parts of the region that exceed the overall improvement in the state or the country. This has strengthened the outlook of most people as we feel this positive growth and come to the realization that “we made it” through the Great Recession.
- Rents have increased significantly in most multi-family properties and depending upon location, retail, office and industrial properties as well.
- Interest rates continue to fall and are at historic lows. Properties will service more debt at today’s rates than they would at rates from even a year ago, so this promotes demand. Buildings are typically trading for Cap rates that are higher than interest rates, so “positive leverage” (borrowing money at a rate lower than the rate of return on the investment) is common in today’s market.
- Competing investments are not as attractive as they once were and are not providing a compelling reason for investors to move their equity from real estate.
If you are an owner thinking of selling your timing may be perfect. With a lack of competing properties, low interest rates and rising rents, the attention your property will get and the competition that will be created by a proper marketing campaign will likely be strong. It is wise to evaluate the property completely to ensure that the rents are at market, or at least measured so that any “upside” in the rents can be quantified.
For investors seeking Bay Area investment real estate, it is important to be patient, but also creative. If one waits for the right building to appear on the market, it might be a long wait. It is important to develop a relationship with a broker specializing in the area and product type that you are looking for since that will increase the odds of finding a suitable property, not necessarily on the market.
For those owners who plan to hold, keep a close watch on rents to make sure you are getting what you can in the current market. Many owners are surprised when rents change quickly and caught by surprise. I recently spoke with a client who found it hard to believe that his rents where 20% below market, but when he placed a “for rent” ad at the price we recommended, he had several quick responses and rented the unit within two days of marketing. Owners may also benefit from discussing financing options with lenders while rates are low. Many commercial lenders are actively seeking properties to finance and refinancing is also quite active in the current market.
It’s refreshing to see the enthusiasm of so many of our recent clients. They realize that real estate can be an excellent long term investment with benefits not found anywhere else. The ability to add value, take advantage of tax benefits, own a tangible asset, and take advantage of appreciation appeals to them. Most of our recent sellers have owned their properties for a long period of time, and have experienced these benefits.
We believe the investment real estate market will continue to improve and strengthen. We welcome the opportunity to discuss how we may add value to your real estate investment.
At Income Property Services A.G., we help investors evaluate their property to maximize their investments in the current market. We invite you to contact us for a free, no obligation consultation.
Another IPS Case Study
“The $375,000 phone call”
A client recently contacted us to ask our opinion about a couple of unsolicited offers he had received on his 8-unit apartment complex. The first offer was for $1,100,000 and offered a quick closing with what seemed to be a qualified Buyer....