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Cap Rate Misery Impacts CRE Investors

By Joseph J. Ori
August 01, 2024

Buying property at low cap rates is one of the worst strategies in CRE investment and finance. I have published three books on CRE investment and two of them are titled, "The 50 Commandments of Commercial Real Estate Investment" editions I & II.

The first key detail is that "acquiring commercial real estate at low capitalization rates significantly increases the odds that the equity investors will eventually lose their capital." This is exactly what is occurring today in the 28 month of the Fed's higher interest rate crusade with the federal funds rate at an elevated 5.25% up from 0.0% in March 2022. Property deals in major markets that looked solid back in 2019 and trading at these sub-5% cap rates have now become an albatross and misery for the owners and lenders.

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