Tuesday, May 9, 2023
Monday, May 8, 2023
FREE Comprehensive Intro to Commercial Real Estate Course
Join us via Zoom for our Comprehensive Intro to Commercial Real Estate event on Jan. 10! Professionals from every sector of the industry will share their knowledge as we explore the fundamentals of commercial real estate.
Date: Jan. 10, 2023
Start Time: 9 a.m. - 10 a.m.CST
Location: Zoom Webinar
The Comprehensive Intro to Commercial Real Estate course will focus on training new professionals with the basic skills and knowledge needed for a successful career in commercial real estate, including a detailed look at the different product types, services and technology you need to succeed, as well as industry trade groups you can tap into, and more.
We’ll also be covering renewable energy with experts from Qcells and IREM.
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Interested in Joining eXp Commercial?
https://www.creconsult.net/market-trends/free-comprehensive-intro-to-commercial-real-estate-course/
Should I Sell or Should I Hold? When is the best time for asset repositioning?
When it comes to selling their investment properties, clients typically ask me,’ Why should I sell?’ Great question. Why should you sell? The obvious answer is that you purchased the investment property as an investment, and it may not be doing as well as other investment opportunities, and after a while, you don’t realize the appreciation and thus maximization of profit from the property until you sell and acquire another investment property. So the question is really, ‘When should I sell? Clients really lose the perspective of the driving reason why they invested in an investment property in the first place. An investment property is just that; an investment. Treated as such, every investment must have a horizon and an exit strategy. If a property was purchased as an investment, then it makes full sense to profit as much as possible from the investment.
The real estate market, like any other market, will go through peaks and valleys. Trying to predict the exact moment of peak or the exact moment the market reaches the bottom is practically impossible. The real estate cycle has four phases; recovery, expansion, hyper supply, and recession. The complete real estate market cycle seems to have an average duration of about 18 years as there is good historical data to support that. So, where are we in that cycle now? How much more upside will we see before we reach the peak? The question really is, ‘What is your appetite for risk?’
Below is a chart of the real estate cycles dating back from the 1800s. The last real estate market crash started at 2006. We are almost 16 years into that cycle. Interest rates are still at all-time lows. Money is cheap, and the threat of inflation is very high. How long can government print money without paying the price down the road? How much road do we have left?
So when is a good time to exit an investment property? As with everything else, real estate is cyclical. Those of us that have been around for some time have witnessed several cycles in the real estate market. Since it is practically impossible to predict the peak of cycles, what strategy should you then use to maximize your investments? Keeping it simple, when evaluating if you should consider selling an investment property, it doesn’t really matter what the current real estate market is like. If you are looking to replace the investment property with another investment property, the ultimate decision to sell should also be based upon if you can increase your returns with the new replacement property, not what state the current market is in now.
There are a number of factors that can impact real estate prices; availability, investment potential, and interest rates, to name a few. Interest rates impact the price and demand of real estate—lower rates bring in more buyers due to the lower cost of money but also expand the demand for real estate, which can then drive up prices. As interests rate starts to inch up, the cost of money increases, and thus the appetite for real estate investments declines.
However, there are many ways that one can still protect their investments. 1031 Exchanges give investors a vehicle to reposition assets and mitigate risk. There are certain asset classes that inherently hold less risk and still perform as an investment vehicle. The questions really come down to; ‘How long do I hold on during this cycle? Do I have the time horizon to outlast another cycle? Is it time to reposition and take advantage of 1031?
As part of the team for our client’s investments, we specialize in building solutions around our client’s needs. We analyze the requirements, crunch the data, and present assets entirely based on their circumstances and the goals they are trying to achieve with their investment.
Have you thought of selling your property and would like to know what it’s worth? Request a valuation for your property below:
Source: Should I Sell or Should I Hold? When is the best time for asset repositioning?
https://www.creconsult.net/market-trends/should-i-sell-or-should-i-hold-when-is-the-best-time-for-asset-repositioning/Sunday, May 7, 2023
2023 eXp Commercial Commercial Real Estate Symposium
Interested in Joining eXp Commercial as a Commercial Real Estate Agent?
Further Info
https://www.creconsult.net/market-trends/2023-exp-commercial-commercial-real-estate-symposium/Saturday, May 6, 2023
Blackstone’s Suburban Chicago Apartments Selloff Swells To $247M
Blackstone is on a nearly $250 million selling spree throughout Chicago’s suburbs, having found two real estate investors who have centered their portfolios on the area to take on big multifamily properties.
Blackstone Real Estate Income Trust sold the 440-unit Green Trails Apartments in Lisle for $100.4 million and the 319-unit Grand Reserve in Naperville for $93.5 million, Crain’s reported. The deals come from BREIT selling the 236-unit Windbrooke Crossing complex in Buffalo Grove for $53.3 million.
New York-based DRA Advisors, which bought the Buffalo Grove property, also bought the Lisle property. DuPage County records show that San Francisco-based apartment investor Friedkin Property Group bought the Naperville complex.
While many multifamily investors have been flocking to the suburbs, BREIT has sold all but one of the properties it owns. Meanwhile, DRA and Friedkin are showing a strong taste for the Chicago area, where each firm has focused its respective acquisitions to make it the largest market for both.
Blackstone took over the recently sold properties and another in Lombard when it bought Resource REIT for $3.7 billion in May 2022. BREIT has listed the 256-unit Martin’s Point property in Lombard for sale but hasn’t found a buyer yet.
BREIT recently had to tighten redemption requests after a breach of its quarterly repurchase limit, though it received a massive $4 billion injection from the University of California system’s UC Investments. Rising interest rates have hindered the fund’s ability to make acquisitions.
BREIT chooses to focus on markets in the South and the West, hoping population booms and job growth will continue to boost real estate there.
Multifamily values have been rising in suburban Chicago, which netted BREIT more money for the properties than they had previously sold for. Resource originally paid $78 million for the Green Trails property in May 2017, signifying a 29 percent increase in value. Grand Reserve’s value rose by 40 percent as Resource bought it for $66.7 million in December 2015.
Source: Blackstone’s Suburban Chicago Apartments Selloff Swells To $247M
https://www.creconsult.net/market-trends/blackstones-suburban-chicago-apartments-selloff-swells-to-247m/Friday, May 5, 2023
Gross Rent Multiplier: What is it and How is it Calculated
Determining which rental property is worth your investment requires carefully looking at various bits of data. The gross rent multiplier in real estate happens to be one of the most important factors you may wish to focus on – and the good news is there are many such metrics you can use to get a good idea of the value of any property.
First Things First: What Is Gross Rent Multiplier?
The gross rent multiplier is a specific formula that helps evaluate a property as an investment. Still, it can also be used to help manage the real-time performance of your existing property. So, what is it?
This is an easy calculation to determine how profitable similar properties are based on the gross annual rental income that those properties will likely generate. It is a helpful tool to use when market rents are changing quickly, which is what has occurred in recent years.
How Do You Use a Gross Rent Multiplier?
Real estate investors can use the gross rent multiplier to compare the rental income potential of one property to another. It is a simplified method of analyzing properties without putting the time and money into a full analysis, which is why it is just a first step in the decision-making process. It is quick and easy to use.
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How to Calculate Gross Rent Multiplier
To calculate this figure, you need to take the market value of the rental property and then divide it by the gross rental income of that property. You can apply it in several ways, such as using the list price or the sale price. You can also use the property’s appraised value. In addition, you can choose the income range that you would like, either monthly or the property’s annual income.
No matter which metrics you use, be sure you are using the same metrics from one property to the next. That way, you get a clear understanding of the value of the properties in how they compare to each other. Without keeping these factors even, you are not producing data that is accurate.
Formula for Calculating Gross Rent Multiplier
The gross rent multiplier formula is:
Gross Rent Multiplier = Rental Property Value / Gross Property Income
What Is an Example of Gross Rent Multiplier?
You can find a gross rent multiplier calculator to help you do the math. However, you may be able to do this on your own (unlike other metrics requiring a significant amount of evaluation and comparison). Here’s an example of how it works.
Consider a property that’s listed for sale at $1 million. It has a gross annual income of $160,000. To determine the GRM, divide 1,000,000 by 160,000. That gives you a GRM of 6.25.
You can continue to use this GRM formula across other properties. Remember, this figure helps you to compare multiple properties to see which one offers the better outcome.
Most of the time, you want properties that produce the most income. The lower the GRM is, the better. The figure here, 6.25, is not necessarily good or bad. Rather, it is just one metric that can be used to compare several other properties.
The lower the GRM is compared to other properties similar to the first one, the better. That means that the property is generating a higher income level, and ultimately, it will provide you with insight into how long it will take to pay for itself.
Advantages and Downsides of Using Gross Rent Multiplier
Should you use GRM? Generally speaking, there is no reason not to use this metric as a first step in comparing two properties. Here are a few things to keep in mind.
Advantages of Gross Rent Multiplier
There are some advantages to using gross rent multiplier:
- Using the average gross rent multiplier to compare several properties is a quick and easy way to see the potential profit difference between two properties.
- The data needed for GRM is typically readily available to investors, unlike other metrics that require estimation or research.
- It can also help monitor changes in property value based on the changes in gross rents. You can monitor this factor over time.
- It is an ideal screening tool that allows you to determine if you should go deeper.
- It focuses on the income the property will generate rather than the price of the property.
Downsides of Gross Rent Multiplier
There are some downsides to using GRM:
- It does not consider operating expenses, which could play a significant role in the overall profitability of any property. A property with high operating expenses may not be as profitable.
- This metric does not consider vacancies or other lost rental income instances or if the property is poorly maintained, which can also impact profits.
- It does not measure the time it takes to pay off a property but rather compares just the gross rental income generated on the property’s value.
Gross Rent Multiplier vs Gross Income Multiplier
Another commonly used metric is the gross income multiplier. This would consider any additional income sources for the property, not just the rental income for it. Though these metrics are often confused, they are rather different, and both are valuable tools.
Some properties have additional sources of income that should be considered when comparing investment opportunities, such as funds from laundry services, billboards, or parking. These add to the property’s value to the owner, and with this formula, it is possible to include them in the comparison.
Gross Income Multiplier vs Cap Rate
Cap rate is one of the other metrics many investors use to help them decide where to invest. GRM is an estimate that helps you compare rental property value based on the income that property generates. Cap rate determines what the property value currently is or should be based on the net operating income returned to an investor.
Net operating income only focuses on normal operating expenses. It does not factor in mortgage payments made on the property, and it excludes debt service from the calculation. With cap rate, the higher the figure is, the more profitable the property could be.
Source: Gross Rent Multiplier: What is it and How is it Calculated
https://www.creconsult.net/market-trends/gross-rent-multiplier-what-is-it-and-how-is-it-calculated/1120 E Ogden
Retail / Office Space For Lease | 3,674 SF | $20/SF NNN
1120 E Ogden Ave, Suite 101 | Naperville, IL 60563
Broker: Randolph Taylor rtaylor@creconsult.net | 630.474.6441
https://www.creconsult.net/retail-office-for-lease-1120-e-ogden-ave-suite-101-naperville-il-60563/?wpo_all_pages_cache_purged=1
1120 E Ogden Ave, Suite 101 | Naperville, IL 60563
Broker: Randolph Taylor rtaylor@creconsult.net | 630.474.6441
https://www.creconsult.net/retail-office-for-lease-1120-e-ogden-ave-suite-101-naperville-il-60563/?wpo_all_pages_cache_purged=1
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