All Forum Posts by: Russ Kitzberger

CREXI and Costar have that information and you can buy a subscription as an investor. One data source may be better in quality or quantity of info; just depends on the individual market.  

Cap rate is usually based on market data, there are surveys that look at hundreds of investors and deals of different asset classes.

Novice investment classes have huge swings in cap rates. 

The cap rate should be based on the asset, if you are buying a leased asset with a credit tenant, the rate will reflect the (lowered) risk in the tenant/lease. If you are buying something without a lease or with a short term lease, the cap rate will be only based on the property and the overall market risk.

For owner users: The most likely lender (who can close a deal) is usually the one that you have the best relationship with, IE the bank you deal with for your commercial banking. They will have a history of your business income and have the most confidence in your finances.

Ask your CPA, but I have seen developers encumber the additional acreage with conservation-type easements donated for tax benefit.  That requires a compliant appraisal or valuation or some type; have not seen allocation used; it usually is a larger parcel determination or a before and after type analysis.

I will add I do conservation easement appraisals, and I would be hard pressed to rely on allocation for an IRS related matter.

NNN, assuming a national tenant; How much is the seller getting if they moved the $ into the stock market right now?

Income-producing RE is a hedge against inflation. Construction costs will continue to increase, there is no one to do the work, no materials, etc. You have both inflationary price increases or stability against depreciation and a NNN income in the cap rate.

IRR is a more appropriate way to measure your return over an investment period that includes unstable periods.

Not every asset will cash flow immediately; What is the projected appreciation?

Every market is different, there are lots of markets that will feel a crunch in the recession. Ohio is a hot market with extraordinary major projects started and coming online 5,10,15 years out that (cash) investors are planning into 5+ year plays. 

I think that would depend on how you are structuring the purchase, definitely ask an attorney in your state to find out what they recommend to create the entity, fund it, and execute/manage the entity.

When I had an attorney partner in an asset purchase we had an operating agreement and other docs.  The docs laid out all the pertinent items like how expenses were handled, how operating funds were handled, the use and intent of the property and assets, and very importantly: how it works if someone wants to exit or is forced to exit.

Every single investor is going to have a different rate.  There are ranges based on location and asset class relative to the perceived risk. RealtyRates.com does a good job at surveys of investors.

When I was appraising and brokering in the dredges of the recession in Cleveland, a 10 cap was the minimum for any asset class. Soon after Multifamily blew up and 4-5 caps in NYC and other coastal after the recession ended were common and a 10 cap was normal in CLE, not a minimum. Not anymore, CAP rates on MF are low everywhere. Now it is tough to leverage with cash flow at the current interest rates in many markets.

To many investors Real estate is an inflationary hedge with relatively low risk.  When T bills are paying low interest and stocks are falling, RE investors are willing to take less return as there is nothing else producing better return.
 

There is a cycle dis-similar to normal office and lasts a few years, it is controlled by the larger hospital system's practice acquisitions.  There are some great opportunities in many markets right now for buy and hold investors, particularly for interim use as individual private offices for ancillary medical arts like counseling, therapy, and massage. 

I suggest dropping the license: If you are not going to represent people or companies in their purchases, or use the MLS.

Having a license exposes you to ethics through the state which you are not bound to as buyer or seller or employee of a company who owns, buys, leases, or sells. Why do you think corporations do not hire licensed salespeople as employees: it's an additional liability to be an agent/broker.  If it is the commission to the agent for representation you are trying to save, perhaps think of a different model to make more money or reduce commissions.

Hopefully, you got your money's worth out of RE school.

This happens in many areas in the country.

You really need to have your local attorney tell you what qualifies legally in that jurisdiction as an agent. 

One of the workarounds I have seen is if the agency is only required to have a physical address, you can get a UPS store box. You can sometimes appoint a local attorney to act as agent, other have hired an employee to site at the property address during normal business hours.  You may consider making a resident an employee. I am sure there are other solutions depending on the circumstances legal counsel advises on.