John Chang of Marcus & Millichap notes, “It makes perfect sense to be cautious, but on the other hand, a lot of investors stay active or even ramp things up a notch when others are stepping aside.” “The agreements they make in these times frequently produce the best long-term results.”
According to Chang, the CRE market is usually “inefficient,” with variations by geography and property type. He claims that while another metro is expanding, one could encounter significant obstacles.
Chang points to the dot-com bubble as a prime example of this. The Bay Area was particularly hard-hit by the recession, but many other markets fared well and kept expanding.
According to Chang, he also exhorts investors to look for possibilities that add value. According to him, purchasing an asset now that is deemed overvalued by sales comps may be advantageous if doing so will allow the buyer to combine and enhance a number of properties, resulting in a higher return on the portfolio as a whole. According to him, uncertain times might also offer chances to purchase special assets that are rarely traded or to reposition assets.
According to Chang, the optimum moment to switch horses may be during uncertain times.
Investors must also consider where the market will be in three to five years. When purchasing properties, Chang advises using loans without prepayment penalties so that the properties can be refinanced if and when interest rates decline.
According to Chang, investors that make purchases during uncertain times frequently have fewer rivals for their business and benefit in the long run. In contrast, investors who “step to the sidelines with the herd” because they are afraid to conduct a deal during an uncertain market typically miss the best investment possibilities the market has to offer. The key to successful real estate investing is to look long-term, take advantage of opportunities, and have an eye on the future.
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