Theres no inventory! What do we buy?
Every morning I am waking up calling every single broker and get the same response "We should have more stuff coming, but as of right now we got nothing". All our direct owner contacts sitting as well because they also want to buy and scared to sell. Money everywhere but no where to invest! Anything thats coming to market right now has a cap rate of half of what it should be...unrealistic sellers.
Fuck you Covid. Fuck you JPow and your bubble inducing policies, you low yield sack of shit.
And yet, it's all selling, so obviously the problem isn't with unrealistic sellers, but unrealistic buyers.
Agree. Competition on products with actual yield is only making matters worse....
But how much of that is driven by a) Comparable sales and B) A lack of New Construction? At the same time, if I'm investing and I'm buying a property at a Cap rate of 3% when it should more realistically be 5%, how can I expect to be willing to pay that much without knowing I'm going to take a wash down the line?
Also, RE is not my forte - so sorry if I used the wrong terms here, but I'm genuinely curious. I'm watching the housing market and I am seriously wondering how much more can home prices go up at this point. It makes no sense to me despite understanding the mechanics of low rates, cheap debt, people moving out of the cities, etc.
Why should it be a 5 cap? Your post presupposes that the mere act of investing in real estate should generate a profit for you. There is a concept called "risk" and it's a major part of the business. The only part, you might say. You don't know that you won't take wash in five years. Why should you?
It doesn't matter what's driving it, that's what the market is. Why do prices ever go up or down? Supply and demand. Just because you're upset that you can't make as much money now as in 2008, or 1988, or whenever, doesn't imply something fundamentally wrong with the market. Cap rates "shouldn't" be anything - they're a basic shorthand for market conditions, not some holy grail of investing in RE. If product is moving and buyers are out there, then the problem is with your expectations, not those of Sellers.
You buy at a 3 cap if the cash flow of a 3 cap works for you. Cap rates in that range are typically what we call “core plus” investments. If you are buying a “core plus” investment you are in it for the low risk yield, not because you think you are going to flip it in 5 years after some price appreciation. So, in that sense, yes they are worth what people are paying for them.
Unfortunately, for most of us our cost of capital ain’t that cheap and hence we bitch.
I've got a juicy building for sale over here down by the shore.
Will eat a$$ for a 10-cap warehouse
Spec developers and brokers making more money than ever before. Look to any industrial I/S team in Socal and look at motherfuckin Keith Corp in the Southeast. Unbelievable .
Hard to say the seller's are being unrealistic if their deals are still getting sold.
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