Why Now Is A Great Time To Invest
In Commercial Real Estate
By Ned Coyle
The author has permitted the reprinting and redistribution of this
article.
For every action there is a reaction. If things are bad for one, they
have to be good for another, right The same principal applies in the
world of investment real estate. We have all read about the developers
and owners of commercial real estate that are undergoing tremendous
financial pressures with some being forced into bankruptcy. So what
happens to their real estate Well, the owner or lender puts it on the
market at a discount to attract a solid, mortgage worthy buyer who can
perform quickly and close a deal. Unfortunately, you as an individual
investor or partnership will never see these deals because they
typically involve several properties valued at several millions of
dollars. And why would you want them If the current owner can't sustain
them what magic can you perform
Net Leased Real Estate
However, there is one asset class that is outperforming the market that
should be at the top of your list. I am referring to net-leased
properties such as drug stores, bank branches, auto parts stores and
dollar stores. As many retailers are struggling to stay open these
retailers are defying the trend and are some of the most solid
performers today. And the prices for these assets are being lowered to
attract investors. For example, asking capitalization rates for a
fairly typical Walgreen's Drug Store twelve months ago were in the very
low sixes. Today, the first of February of '09, the asking prices are
pushing the seven cap rate range, with some higher. Translating that
into a sale price, what was being sold a year ago for $6,100,000 can be
purchased now for $5,360,000. Same tenant, same credit. The credit
crunch has triggered widespread re-pricing in all sectors of the real
estate industry. In general, the market has witnessed Class A property
cap rates increase by 25 to 75 basis points while B and C property cap
rates have climbed 50 to 150 basis points. For buyers of newly
constructed net-leased properties with 10 plus year leases to credit
tenants, well-capitalized buyers are finding that this is a great time
to invest in net-leased properties.
When considering the purchase of any commercial real estate investment
property you must ask yourself one critical question -what are my
management responsibilities in terms of time and physical effort With a
net-leased property the tenant pays all, if not most of the expenses
making the properties next to management free. If you are a
professional without the time or inclination to devote to your real
estate investment but at the same time understand all the benefits of
owning real estate, it should be pretty obvious that this property type
suits your lifestyle.
Conclusion
Very simply stated, prices are coming down for even the best real
estate, and net-leased real estate properties offer the investor a
conservative investment strategy. These are properties with long term
leases with credit tenants in good locations and no management
headaches.
Ned is a Vice President, Investment Properties with the CB Richard
Ellis Contact 419-794-3953 ned.coyle@cbre.com or
httpwww.netleasesuccess.com
If
you would like to take advantage of the market and learn how to invest
in real estate and you are local to the Dallas Fort Worth area, I know
a really great teacher and mentor here in Arlington Texas. Please take
a look at his web site: DennisJHenson.com,
Dennis has a great Mentoring and training program, I know because I am
one of his former students. I learned a lot from his one on one
teaching technique. - Michael Harman 817-457-7572
mchfun.business@gmail.com
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