Real Deal #48
New Video:
Quote I love: “Simplicity has a way of improving performance by enabling us to better understand what we are doing.” - C. Munger
The general mood has been negative in real estate investing over the last 9 months. Interest rates are stopping the flow of transactions, insurance agents are now the bearer of bad news, and bank confidence is now at a 15 year low. Maybe it is just the spring weather, but my mood is starting to shift. I would like to make some predictions, if you disagree email me back.
Most commercial real estate owners are NOT over leveraged and thus will be able to ride out the storm with little pain.
Small and regional banks are doing just fine. Their deposit to loan ratio may be lower than hoped, but loan to value on most commercial loans are in a strong position. (see bullet point above)
BUT if you do need to sell, interest rates are 7.5%+. You will be taking a 20% discount to prices just 18 months ago.
Real estate will continue trade over the next 24 months due to death, divorce, and estate planning issues. These properties will trade on or off market through real estate brokers with strong relationships and good reputation.
I believe fewer deals will trade, but the ones that do will look like gems in 3-5 years.
Finally, investor sentiment is a near an all time low. While the worst is not behind us, now is the time to start looking for quality deals. It seems to me that many are “waiting for the other shoe to drop.” While others wait we plan to act aggressively in spots.
Our core focus is and will continue to be self storage, but it will be interesting to see if anything shakes loose in other asset classes over the next year or two.
It was short and sweet today. If you enjoyed this today, please forward it to another curious friend. I love your replies to The Real Deal. I read every single one, and I try to respond as often as I can.
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