Well all of you are getting into pretty sharp detail about all this and honestly I'm struggling with a couple things.
1) I didn't see any end to a post that dictated anything with clarity in terms of making a purchase decision so it all seemed rather academic in nature, which is great but even with 2 degrees, about 10 minutes of that required a break from the material.
2) The discussion seemed to chase a lot of "what if" scenarios with expectations that current trends in recovering markets would be linear in that the heat will keep coming and something has to keep rising, either rents, price, rates etc.
So, I may have a very different vantage point being here in the middle of the country, nearly all the posts were from either east or west coasts. When speaking about complexes anywhere in the country cap rates and all the other metrics will be used as a valuation I'm sure but the real world has boundaries and that's why I got the impression that there was a lot of academia in the conversation.
PRICES on MFH can only rise so much before it becomes unattractive to purchase - that is a real life boundary that will end this discussion.
RENTS - can only increase so much to keep pace before a property is unattractive and vacancy rates increase and rental rates become a detriment to the investment because there is a limit to which rents can rise in a given market (sustainability or lack thereof).
AND RATES - rates can only get so high before the rate level slows the economy and then later slows the economy to a degree that significant damage to the economy occurs. Obviously the fed would seek to mitigate such effects on the economy with respect to rates and rate changes but with respect to buying as an actual investment rather than speculative purchases (as we saw in pre-crash behavior and property prices) and knowing you were going to be making money at the time of purchase and that the return would be acceptable to the investor(s), there is a window in which property values must fall before they exit out of view to one side or another (law of diminishing returns) and after values have left the investment window it really doesn't matter how high or low rate or values rise or fall, we as investors will not be discussing the matter anyway. We will have moved on to other areas or property types that will yield returns.
Anyway, I might get run off of this post for my lack of ability to discuss cap rates at length and so on and so forth, hopefully not. And if I am off in left field by myself, would somebody kindly give me a direction to travel to be able to discuss these cap rate matters as if we were talking about the weather.
Thanks - Jeff
