Investors Inbox

07/28/2023

Interesting correlation on how property tax increases from homeowner relocation shifts impact the NOI on multifamily. This time around NJ is actually less than other markets.

The highest increases in a metro area were 15.3% per unit year-over-year growth.

04/29/2022

The impact of Gross Domestic Product (GDP) on CRE is two-fold depending on the transaction side. For investment property owners, the impact stems from long-term leases w/ fixed rents over an extended period of time; such as NNN single-tenant net leases…i.e…CVS, Walgreens, etc. During said period, Owners are hampered w/ extremely limited opportunity to achieve rent increases; a percentage that’s optimal for keeping pace with the inflation rate. As a result, increased operating expenses from supply chain disruption continue to mount as the discount value on today’s dollar steadily erodes income and return on investment. From the Buyer’s side, spending is lessened due to rising interest rates as a rapid pace. Traditionally, every ½ percent rate increase translates to approximately -5% decrease in purchasing power. High GDP shifts elevated costs of materials to builders for new construction thus trickling down to consumers in the form of increased purchase pricing. Will be interesting to see how the current scenario plays out; high consumer demand, supply chain constraints, elevated cost of goods, rising interest rate vs the pattern of consumer spending.

04/04/2022

As we approach the tax filing deadline for Year 2021 taxes by April 18th, 2022; it’s imperative that property owners and investors retain tax professional advisory from a trusted resource that’s seasoned in processing returns that involve real estate. The tax advisor’s expertise towards identification and proper categorization of legitimate tax incentives to adequately lessen tax liability on your respective investment property holding is paramount. Insight towards capturing annual depreciation and cost recovery of capital improvement expenditures for property preserve is a plus. Are you in good hands with the right tax pro?

04/01/2022

With an influx of investment property Fix & Flip projects and Ground-up construction, surveys are a major document that shouldn’t be taken lightly. In lieu of relying on Seller’s to provide copy of said documentation from their previous purchase, it behooves Buyers to spend a nominal fee (usually a few hundred dollars) to obtain their own instrument primarily for the following reasons; 1) to confirm accuracy of property lot lines and determine if any encroachment(s) were missed in a previous transfer of title and 2) to obtain adequate title insurance coverage in the event encroachment from a neighboring property is discovered and becomes an issue well after the buyer takes possession. For an addititonal fee, consideration for purchasing markers to physically define property lot lines is definitely warranted.

03/29/2022

Despite volatile economic conditions and fluctuating soft costs to borrow money, competition for investment property; especially for multifamily and industrial warehouse/distro respectively, remains white hot!!! To better position oneself for serious contention, hefty escrow/down-payment, limited contingencies and shorter closing date windows are the leading factors Sellers are targeting in the decision -making process. Investor pressure stems from reduced funding leverage to cover an increased outlay of upfront cash required for better positioning in the property chase against an influx of 1st-time buyers; mostly renters converting to ownership as owner/occupants who are simply willing to pay more thru lender financing. A deeper dive for due diligence and pinpoint underwriting/forecasting yields over a five to ten-year hold period are even more crucial as appraisal waivers are now on the table more so than ever. To effectively navigate these economic waters, it’s imperative that Investors be mindful of building solid vendor relations with resourceful real estate industry professionals well versed with investment property.

03/25/2022

Fed Rate Impact Purchasing Power - With the recent FED rate hike by 0.25% or 25 basis points; one basis point is equivalent to 1/100th of a percent, the cost for lending institutions to borrow money from the Federal Reserve has increased thus creating a trickle-down effect to consumers engaged in the real estate market. Investors seeking stabilized performance property opportunities will be impacted by way of higher interest rates which means less purchasing power. From a Property Owner’s perspective, said financing increase will lessen the pool of qualified buyers thus resulting in strong potential for downward pressure on market resale pricing. The caveat is real estate demand remains high while housing supply; rentals and primary residence, remains low as evidenced by today’s Seller’s market climate. As an Investor or Property Owners, strongly consider starting a reassessment of your respective investment strategy as opposed to futile attempts towards timing the marketplace.

03/21/2022

In today’s economic climate, tenant requirements for neighborhood retail space (2,500 SF and less) have become even more reliant on business platforms that feasibly are positioned to achieve sustainable within a shorter timeframe; more so for start-ups. The traditional 5-Year lease term w/ renewal option appears to align more favorably for franchisees due to brand recognition and credibility of the respective consumer service provider. For start-ups, 2-3 year commitments look to be more reasonable as new entrepreneurs are facing the hurdle of absorbing significantly higher cost of goods and services from inflation (7 percentile range and rising) while establishing the business within a 3-6 month window. Striking a balance between adequately-capitalize tenants with a thoughtful business plan and property owners empathetic to anticipated tenant growing pains will be paramount in the ever-evolving future of neighborhood small business.

03/14/2022

As we embark on the conclusion of Q1 2022, the pandemic has significantly altered the dichotomy of CRE and investment properties for seasoned property owners and novice investors alike. In regard to multifamily; mixed-use and residential rental property (2-4 units) included, should forecasted interest rate hikes solely compel buyers to engage an impulse acquisition? Will inflation speculation reshape the thinking of property owners and create immediate urgency to divest or refinance? Your thoughts?

01/13/2022

Interesting development projects; gaming and non-gaming alike, w/ economic upside slated for Atlantic City within the next 2 years. Read on for details.

More Family Entertainment, Supermarket Are Part of 2022 Plans

10/25/2021

Major accomplishment for City of Newark regarding newly-appointed Transit Village designation status; an attribute poised to positively impact its economic landscape and perpetual renaissance. Read on for details.

City Now Qualifies for Program Aimed at Spurring Development

09/30/2021

What's the most appropriate approach for investors of investment property to consider as it relates to cap rates? Should this index correlate with interest rate volatility or one's respective capex costs exposure? Read on for a varied perspective.

Here’s the key: ask yourself what factors will drive every market participant’s perception of risk

09/01/2021

Investors of multifamily are implored to have the conversation w/ their respective financing pros regarding the level of scrutiny loans will be facing post-pandemic for this asset class. Income based on ACTUAL or PRO FORMA figures? Read on for further perspective.

Rent collections and future rent growth are the biggest concerns for Liberty SBF on new multifamily deals.