Most investors want to buy low and sell high. A major factor in that equation is understanding when the market has peaked — after all, once the market peaks, it’s time to sell.
It’s a pretty unanimous belief that most commercial property values have now peaked. The real challenge is that once you sell, you have to get back in line to buy something else. That’s certainly the most common concern we hear from our clients.
The Proper Mindset
First, let’s agree that it’s a great time to own commercial real estate. I've seen that pricing has hit record highs. Most commercial properties also put off consistent cash flow. It’s hard to give that up, even if you recognize that your property has reached its peak market value.
It’s easy to tell yourself that there’s nothing else out there to buy, so why sell your golden goose? And if you did sell, who wants the pressure of quickly finding a suitable replacement property? This line of thinking usually results in procrastination.
Here’s the problem with procrastination: the real estate cycle. Historically, real estate cycles tend to last about 10 years. The last cycle downturn was in 2008; add 10 years and you get 2018. Another way to think about this is: Once the real estate cycle tips downward again, you should be prepared to wait up to 10 years for your property value to get back where it is today.
That's an oversimplification, but the underlying idea is important — today’s property values will not last forever. A combination of changing investor sentiment, changing tenant preferences, rising interest rates and overbuilding will ultimately knock commercial values down. It’s not if it will happen, it’s when it will happen.
If nothing else, recognize that you’re on a roller coaster ride and if riding the real estate cycle back to lower values doesn’t interest you, it might be time to get off.
How To Sell At The Peak Of The Market -- And Why You Should curated from Forbes - Real Estate
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