Although capitalization rates are not tied precisely to interest rates, the Fed’s tightening policies almost certainly will drive cap rates up in the coming months. Whether this will impact cap rates in 5-10 years we can only guess, but the prospect of higher “exit cap rates” puts a premium on potential revenue growth. Passive investments in sectors with short-term leases (e.g., multifamily, self-storage, senior housing, student housing, for example) may have a better opportunity to increase net operating income over time. In turn, such properties may have a fighting chance to preserve value when cap rates rise. Regardless of whether you invest in apartments, self- storage or industrial buildings, passive replacement properties offer the opportunity to live a different lifestyle as a real estate owner.
PASSIVE INVESTMENTS IN SECTORS WITH SHORT-TERM LEASES MAY HAVE A BETTER OPPORTUNITY TO INCREASE NET OPERATING INCOME.
RICHARD D. GANN, JD Managing Partner 1031 Capital Solutions (800) 445-5908 1031CapitalSolutions.com
Richard (Rick) Gann is an attorney, licensed real-estate broker, and general securities principal specializing in 1031 exchange solutions and he is co-author of the book How to Retire from Being a Landlord.
Disclaimer : This is for informational purposes only, does not constitute as individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance. DST 1031 properties are only available to accredited investors (typically defined as having a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years; or have an active Series 7, Series 82, or Series 65. Individuals holding a Series 66 do not fall under this definition) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney. There are material risks associated with investing in DST properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk. Statements concerning financial market trends are based on current market conditions, which will fluctuate. Past performance is not indicative of future results. Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC (CAM), an SEC registered investment adviser. 1031 Capital Solutions is independent of CIS and CAM.
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