Investment Sales – Where Cash & Credit are King

March 29, 2010

While real estate is a cyclical business, the real estate market has not undergone a significant downturn like this since the Telecom Bust.  This is a direct result of bank reform, where lenders are tightening their lending requirements and fewer buyers qualify for properties that aren’t owner occupied.  As a result, cash and credit are more important than ever. 

Jake Plotkin, Broker, NAI Carolantic Realty, jplotkin@naicarolantic.com

It is difficult to get an investment property financed, however, if a prospective purchaser is not overly leveraged and has a reasonable cash reserve along with good credit, then the sky is the limit.  Cap rates have risen over the past 18 months as savvy investors have taken advantage of a down market.  With less qualified buyers, sellers have to increase the yield to lure qualified prospects into an investment sale transaction.  In an effort to clean up their balance sheets, banks are reigning in on investment lending and are either calling notes due or are simply not renewing notes as they have in the past.  This creates a unique opportunity for the right investor. 

Although a property may be cash flowing and that particular owner has never been late on a payment, the inherent risk that banks see trump all logic, resulting in a distressed owner, but not a distressed asset.  Mom and pop stores with long histories are trading between 9-11% and investment grade properties have seen Cap Rates rise from 6-7.5% to 7-9%.  While many people are upset that this is a tough market, I have not heard any complaints from my qualified investment buyers.  They have not seen opportunities like this in some time and can’t wait to capitalize on tighter lending guidelines.

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3.52 Acre Site Near Cary Towne Center

March 2, 2010

NAI Carolantic has recently been given the opportunity list a 3.52 acre site near Cary Towne Center just off Cary Towne Boulevard, and less than .3 mile from I-40.  The property is located at a signalized intersection and would be ideal for an office, retail, bank or restaurant user.  Based on 2007 information, the traffic count is 17,000 vehicles per day.  The average household income within a three-mile radius is $80,639.  For additional information, please contact Moss Withers at 919.832.0594 or mwithers@naicarolantic.com.  We look forward to an opportunity to discuss this property with you.


Now’s the Time for an Owner Occupant

February 9, 2010

As we begin our climb out of the recession there are many opportunities in commercial real estate, but none greater than that for the owner occupant…where the proprietor of the business, owns the real estate as well.  There is no better time to make the jump from leasing to owning your real estate!

Kyle Greer, Broker with NAI Carolantic

Why?  First, prices have been reset.  Over the past 24 months, we have seen prices fall on real estate and in some cases as much as 35%.  This is primarily due to the fact that values became so inflated during the boom in the mid-2000’s they are now retracting to a more normal level.  So you are ‘buying in’ at a great time.

Second, if you’re looking to build from the ground up or fit-up an existing building, construction costs are at record lows due to the lack of work.  Contractors have slashed their margins just to keep crews working which translates into a great time to build or expand!  I work with a client who builds the exact same building at all locations and in the past two years, we’ve seen the bid prices drop over 40%!

Finally, and probably most critical is the financing.  In the mist of frozen credit markets, owner occupants are the ones who can get the financing needed to execute deals.  There are many reasons banks still have confidence in owner occupants.  They include:  Banks are anxious to build relationships with these businesses as they can sell them other services that are profitable to the bank; underwriting and monitoring is easier on owner occupied real estate; and typically owner occupants have more assets in case of default.  Not only are the banks eager to work with owner occupants, they are receiving the most aggressive financing out there and in some cases as much as 90% LTV!  There are many other programs such as SBA loans and other stimulus money that is directed to the small business owner.  On top of all of this, interest rates are at historic lows.

In summary, prices have been reset, there are many great properties, building costs have never been cheaper, financing is available, and rates are the lowest they’ve ever been.  If you are a business owner and have been on the fence considering whether or not to purchase land or a building for your business, now is the time to act!