I want to discuss the market dynamics and the difference from a few years back until today. The market clearly has changed for the better. A lot of this has to do with financing and the availability of financing. A number of years ago many banks had decided not to lend money. Other banks decided they would be overly conservative. Now that has all changed with the exception, or rather understanding that banks will only lend to credit worthy buyers who are buying buildings that are worthy of investment. What I mean by that is buildings must cash flow and realistic expenses must be considered such as management fees and vacancy factors. After all, buildings do require management and spaces do become vacant. These costs along with an understanding that maintenance reserves must be in place and considered allow for a reasonable projection of building performance. With that said, if the building has a debt service coverage ratio of 1.25, many banks will lend on the transaction. With interest rates being so low hovering around 4% and commercial rates at about 5% it is reasonable to assume a cap rate of 6.25 will be adequate to meet at 1.25 debt service coverage ratio. If you are a seller or an owner of an apartment building or commercial property that is considering selling a capitalization rate of 6.25 can be expected if you have an investment grade building or a building that has a durable income stream such as apartments. What this means to you as a seller or owner of the building is that the opportunity to sell is better today then it would be if the interest rates were slightly higher. For more information or to discuss market conditions and specifically your building please feel free to call us.
With the market being so strong and the fact that it is easier to sell than it had been, we are offering super low commissions. If the property is priced well and marketed properly you can expect to minimize your cost to maximize your profit. Call today, and we will discuss pricing and marketing strategy.
La Grange, Il
Western Springs, Il