{"id":1004161198,"date":"2016-12-07T10:09:23","date_gmt":"2016-12-07T18:09:23","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004161198"},"modified":"2022-12-07T21:26:24","modified_gmt":"2022-12-08T05:26:24","slug":"the-benefit-of-buying-now-vs-later","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/the-benefit-of-buying-now-vs-later\/","title":{"rendered":"Why Buy Now Instead of Later?"},"content":{"rendered":"<p>By Scott Campbell, Associate Director, Calkain Cos.<\/p>\n<p><a href=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2016\/12\/Scott-Campbell-Calkain.jpg\"><img loading=\"lazy\" decoding=\"async\" data-attachment-id=\"1004161204\" data-permalink=\"https:\/\/www.commercialsearch.com\/news\/the-benefit-of-buying-now-vs-later\/scott-campbell-calkain\/\" data-orig-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2016\/12\/Scott-Campbell-Calkain-e1481131389436.jpg\" data-orig-size=\"400,347\" data-comments-opened=\"1\" data-image-meta=\"{&quot;aperture&quot;:&quot;0&quot;,&quot;credit&quot;:&quot;&quot;,&quot;camera&quot;:&quot;&quot;,&quot;caption&quot;:&quot;&quot;,&quot;created_timestamp&quot;:&quot;0&quot;,&quot;copyright&quot;:&quot;&quot;,&quot;focal_length&quot;:&quot;0&quot;,&quot;iso&quot;:&quot;0&quot;,&quot;shutter_speed&quot;:&quot;0&quot;,&quot;title&quot;:&quot;&quot;,&quot;orientation&quot;:&quot;0&quot;}\" data-image-title=\"Scott Campbell, Calkain\" data-image-description=\"\" data-image-caption=\"\" data-large-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2016\/12\/Scott-Campbell-Calkain-e1481131389436.jpg?w=400\" class=\"alignright wp-image-1004161204 size-medium\" src=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2016\/12\/Scott-Campbell-Calkain-e1481131389436.jpg\" alt=\"Scott Campbell, Calkain\" width=\"300\" height=\"260\" srcset=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2016\/12\/Scott-Campbell-Calkain-e1481131389436.jpg 400w, https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2016\/12\/Scott-Campbell-Calkain-e1481131389436.jpg?resize=300,260 300w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a>What do the numbers really look like if you were to buy a 5 cap rate today instead of a 5.5 cap rate one year from now? This is a\u00a0typical conversation I have with most of my buyer clients when looking at the net lease sector in today\u2019s market. Whether they are considering the potential of rising interest rates from the Fed or the impact of the presidential election results, these factors have been a component that most investors overdramatize. Calkain\u00a0provides up-to-date information to our clients by performing various studies addressing this scenario.<\/p>\n<p>If you were to wait to buy a net lease asset that today is a 5 cap, with the hope that this same asset\u00a0would be a 5.5 cap a year from now, then the investment dollars gained would not be what you might\u00a0expect.\u00a0Take the pharmacy market, for example. At this time last year, most pharmacies were trading 53 basis points (bps) lower for various reasons (such as the coming Walgreens-Rite-Aid merger). Let\u2019s assume you were an all-cash investor with a purchase price of $5 million, and you made the decision not to purchase a year ago because of\u00a0an aggressive cap rate inflation of 50 bps, with lost income numbers of $275,000 (NOI assumption). In the rare event that you <u>did<\/u>\u00a0see an increase of 50 bps in the net lease sector and bought one year from now, your overall effective \u201cgain\u201d would be quite minimal. When you figure that you are most likely going to put your non-working dollars into a bank with around a 1 percent return, you are only positive $37,000 over a 10-year term under\u00a0the example given.<\/p>\n<p>If the Fed raises interest rates 25 points in December, which is most likely the case, many investors feel there will be a comparable rise in cap rates. In all actuality, there is little correlation between interest rates and cap rates from a historical standpoint. Even deep into 2008, one of our biggest recessions in United States history, we only saw an average cap rate increase of 85 bps across the country with credit tenants, so a 50 bps increase is very unlikely in the next few years. While we expect only\u00a0a minimal fluctuation in\u00a0cap rates in 2017, this extreme cap rate example of 50 bps would significantly reduce one\u2019s 10-year gain, if not put it into a negative category.<\/p>\n<p>There are many aspects that an investor must look at when deciding on the best net lease asset, but waiting for an extreme uptick in cap rates is not as lucrative as buyers currently sitting on the sidelines widely believe. The true impact is that you&#8217;re not putting your dollars to work.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Scott Campbell, Associate Director, Calkain Cos.: While there are many factors investors must consider when buying a net lease asset, waiting to buy is not as lucrative as one may think.<\/p>\n","protected":false},"author":1684,"featured_media":1004508492,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[23891,21684],"tags":[33054,32810],"class_list":["post-1004161198","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-national","category-viewpoint","tag-calkain-companies","tag-interest-rate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.0 (Yoast SEO v28.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Why Buy Now Instead of Later? 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