How dumb is this?

In 2007 you would have bought a property at a 7% cap rate & thought you got a steal.  Today, the property won't appraise out to the loan balance so... since you can't refinance, you have to sell.  The question is, to whom?  For how much?

 This is where a lot of hedge funds and their real estate owning affiliates are in exactly that position.  At least these guys are smart enough to sell when they see the writing on the wall. 

Now you have to kiss a lot of frogs before you find a prince.  But the princes are out there. 

First, the property has to have a tenant.  Cash flow is the name of the game.

Second, it has to be a good tenant, that is going to be there, maybe not investment an investment grade tenant, but close.

Third, you need a long term lease, not some five and out, but a twenty year or close to it lease.  Short term leases are not financiable! 

Now we get down to the price, a 9% cap rate is the base, you need at least a 2% spread between the purchase cap rate & the loan to make it work for you.  That is called the risk premium.

Want to know more?  email me:  Lee Topham [email protected]