NetGainRealEstate.com, the bellwether real estate investment publication, has increased its recommended cap rate range to a high end of 7.5%, due in large part to the plunging Consumer Confidence Index.
Mountain View, CA (PRWEB) November 19, 2008 -- In light of recent data from key economic indicators, NetGain's National Income Property Index™ (NIPI™), the preeminent income property guide for increasing rate of return (ROI) and minimizing investment risk, has established that today's income property investments necessitate 7% to 7.5% capitalization rates. For the past two years the recommended range has been steady at 6.5% to 7%.
NetGain Increases Cap Rate Recommendations
Recent changes in the U.S. economy that predicated the cap rate shift are as follows:
- The unemployment rate for October increased to 6.5% from the prior 6.1% rate for September.
- The Consumer Confidence Index for October is 38 (1985=100), a record low.
- The Commerce Department reported that the gross domestic product (GDP) fell at an annual rate of 0.3 percent in the July-September period, a significant slowdown after growth of 2.8 percent in the prior quarter.
NetGain Co-founder, Allen Cymrot, states, "Income property owners have to pay particular attention to expiring leases in our current economy. All income from leases that expire within one year has to be re-evaluated when determining the net operating income to compute a capitalization rate. Leases with an option to renew will still benefit the lessee. If market rates go up, the lessee will execute the option. If market rates go down, which will be most common, the lessee will not execute the option but instead choose to re-negotiate the lease at a lower rate."
Along with cap rate recommendations, NetGain simultaneously released a prescription for the U.S. economy that would provide commerce to bolster income property along with other industry sectors.
States Co-founder Robert Mann, "The disease and the cure for the U.S. economy both revolve around energy and energy independence. Only robust energy-production industries have the potential to jump-start the employment base and lift income property values. In the meantime, cap rates at or close to 7.5% are recommended."
NetGainRealEstate.com is a wholly owned subsidiary of NetGainR.E.Inc. In addition to capitalization rate recommendations, investors may also find bi-monthly essays, a comprehensive due diligence checklist, an extensive question and answer section, and a composite index of REIT data at www.netgainrealestate.com.
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