May 7, 2022
What should investors watch for in order to make smart decisions? My co-host, Stephen Simpson, and I share our insights on where cap rates are headed. Interest rates are going up, and this means that cap rates will also go up. We discuss how this affects buyers and renters, as well as developers. We also share thoughts on the provincial government's proposed housing wage.
[00:01 - 09:01] Global Events and Other Factors Contributing to the Changing Rates
- Insights on how inflation is driven
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- This is through factors such as supply chain disruptions, geopolitical events, and low-interest rates.
- Considering the variety of global events affecting the economy which could have an impact on rates
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- The current market conditions are uncertain and this is an opportunity for those who are smart.
[09:02 - 29:06] Have a Specific Plan in Place for Your Investment
- How there is demand despite low cap rates
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- The influx of immigration requires the federal government’s attention to address the issue of housing supply.
- The market for real estate will remain strong in affected areas.
- When land prices become more and more expensive
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- The development will either have to stop or developers will have to charge more.
- Buying existing commercial properties versus developing new commercial properties
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- Consider the risk involved and the demand for the product.
- Ground-up development projects may be riskier.
- Before starting a commercial real estate business
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- Have a team that can help you make good decisions and be aware of the risks involved in any given project.
- Investors should consider investing in properties outside their target market in order to get better yields and access to different markets.
[29:07 - 37:50] Check Your Bias and Don’t Be Crippled
- The power of relationships
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- New investors should take the time to build relationships with local real estate professionals.
- It can be difficult to build a relationship with someone online or over the phone, and it is important to take the time to get to know someone before investing in them.
- Looking beyond cap rates
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- Cap rates can be helpful in evaluating properties, but they can also be limiting if used improperly.
- It is important to define specific parameters that work for you, such as size and location.
[37:51 - 39:37] Closing Segment
If you are interested in my coaching and consulting program, please reach out to me through email at shane@shanemelanson.com. I want to make sure to cater to those interested, so please use the word “coaching” on the body or subject line.
You can also follow me on Linkedin, and Twitter. If you would like to go even deeper into the world of commercial real estate, head over to Shane Melanson, a roadmap to investing in commercial real estate! Get my book Club Syndication - How The Wealthy Invest Their Money.
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Tweetable Quotes:
“Right now, today, there is a lot of uncertainty. And I think that is an opportunity if you're smart.” - Shane Melanson
“I think by and large, if you're going to get into development, maybe look at partnering up." - Shane Melanson
"Cap rates can be useful when you're talking and evaluating properties, but they could also be very limiting if you're not careful."
- Stephen Simpson