WOULD YOU RATHER?

[i_have_so_much_to_learn]

Hi there,

Quick straw poll...

Would you rather:
OPTION 1: 4.5% cap rate, 3 unit property, B+ area but 3-4 blocks away from a C area. neighborhood is stable, no development. House doesn't need work. All units pay their own heat.

OR

OPTION 2: 0% cap rate, 5 unit property, A+ area, and neighborhood is improving heavily within next 5-8 years. (lots of investment in the neighborhood). 2 units pay their own heat, 3 units are "included".

[RWD]

You know you can make actual polls on here, right?

[i_have_so_much_to_learn]

You know you can make actual polls on here, right?

today i learned :)

[PMJL34]

Neither. But if I HAD to choose, I’d choose first option.

Also, it can’t be A+ location if it will improve heavily in 5-8 years. A+ location implies that it doesn’t need improvements.

[i_have_so_much_to_learn]

Neither. But if I HAD to choose, I’d choose first option.

Also, it can’t be A+ location if it will improve heavily in 5-8 years. A+ location implies that it doesn’t need improvements.

It's basically the best neighborhood in the city, and it's getting a ton more development. I.e. they're rehabbing and replacing old buildings with 5-8 story buildings.

[Paper Chaser]

I think seeing companies like Amazon halt major construction projects right in the middle of the project, or massive office owners defaulting on huge loans has made me pretty suspicious of any "upcoming" development/gentrification efforts. Things are uncertain. Especially in parts of commercial real estate. Depending on other people/companies to continue to invest in an area comes with risk, and we seem to be heading for some financial turbulence.

Rent increases are also starting to slow drastically, or even reverse in many locations. Cap rates now might be very different from cap rates in a couple of years.

If I were looking to invest in new real estate right now, it would have to be a pretty amazing deal with a heavy emphasis on strong cash flow. If you can add value to a property on your own that would be a benefit too. Control what you can control, and don't stake your returns on ever increasing rent, or appreciation.

[ChpBstrd]

I would also say neither. The deals on bonds, CDs, and preferred stock are too good to lock oneself into a 4.5% or - nope - 0% cap rate. I voted for the 4.5% cap rate for lack of options.

[SilentC]

I would also say neither. The deals on bonds, CDs, and preferred stock are too good to lock oneself into a 4.5% or - nope - 0% cap rate. I voted for the 4.5% cap rate for lack of options.

+1.  The only reason I can think of to own RE right now is if rates fall and that bet is probably better expressed through owning long dated bonds or preferreds.