The goal of keeping your powder dry is to be ready to act when a financially viable acquisition becomes available. We've seen some excellent acquisition opportunities in the Boise - Meridian - Nampa - Caldwell - Eagle markets and investors need to act when those opportunities are available.
Unfortunately, I see real estate agents advise potential buyers to buy either because the market is going up & "you better buy before property values go up more" or when the market is in decline the punch line seems to be "there's never been a better time to buy and you better buy before property values start going back up." That's why I like commercial real estate, values are established based on financial performance.
Okay, in one of my last blogs, I advised investors to keep their powder dry. In a very small way I began to feel like Gerald Ford in the '70s with his Whip Inflation Now ("win") button that sent the market into a further tail spin. Now, I don't put my comments at the same level of importance as the actions of a President, I get a little heady from time to time, but I don't think I get that bad. That being said, let me reinforce that the purpose of keeping your powder dry is to take advantage of a good investment opportunity when it becomes available.
Case in point. There was an excellent flex building on the market. I felt like the property was over priced when initially marketed even in the hottest time of the market. As a result, there weren't any sales for probably over a year. When the market went soft and credit tightened, the banker probably refused to renew the loan, forcing a quick sale. The pricing that came out was pretty much at cost making bottom of the market rents feasible to make this project pencil.
I had a client looking at acquiring some of the units and I warned them that the units probably won't last long. As I spoke those words, I wondered how many times they've heard that from a real estate agent. In all fairness to everyone, they were seeking pre-approval for a loan to make the acquisition. When they told me to write up a Purchase & Sale Agreement, I called the listing agent to get an update. You can guess what the response was, I'm sure. All of the units had gone under contract.
Such is life. Moral to the story is "Keep Your Powder Dry & Be Ready To Act When Investment Grade Properties Become Available."
Be good & I hope you are all doing well!
Scott Nicholson
Boise Valley Commercial Real Estate, LLC
208-890-3939
www.BVCRE.com
Scott@BVCRE.com