Many investors are starting to notice the attractive Cap Rates being offered for single tenant NNN retail properties and are seeking out these opportunities. Some investors are selling off their multifamily properties because they know they are at the top of the market and can optimize on their asking price, allowing them to maximize their purchasing capacity when they complete a 1031 exchange and transition their portfolio forward into other investment real estate.
Clients often want to know what to offer on a property listed for sale. We all want value in life and to feel that we are smart consumers. Most good commercial real estate brokers have carefully studied the market for Cap Rate trends, availability of other similar assets for sale on the market, pent-up buyer’s demand, and their seller’s motivation.
To Low Ball or Not To Low Ball
Some investors have the prehistoric mindset to offer low to attempt to identify flexibility in price. The low-ball offer can yield some valuable information. However, it can also set the next buyer up to make a better deal than what would have otherwise been available if the bottom-feeder guru would not have offered such a ridiculously low price.
The key here is to be an expert in your market area for the asset that you desire to buy. On occasion to motivate a quick transaction, a seller unknowingly pricing their property too low or intentionally setting a rather low price. If you see a great opportunity, don’t be afraid to offer the asking price if all of the indicators show that it is a good investment opportunity.
You can always come back and adjust the contract price if discoveries are made during the due diligence period that indicate you have offered more than what is warranted given the new discoveries. Again, paying the asking price is not a sin.
Ask Your Broker What to Offer on a Property
Takeaway: Ask your trusted Real Estate Broker what they think the property is worth. Most good brokers can provide you with a series of market comparable properties that have recently sold and will give you a pretty good idea of how the market is voting for sales price and Cap Rate.