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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Moominoid who wrote (60849)	8/26/2006 6:08:13 PM
From: Elroy Jetson	Read Replies (2) \| Respond to of 306849

The Cap Rate for large apartment buildings wasn't pushed down as much as it was on duplex and fourplex units. Duplex and fourplex units were more accessible to the small investor with equity from their homes. Accordingly these units are now priced three times higher than they were six or eight years ago. In contrast, rents are 15% to 20% higher than they were six to eight years ago. Larger projects have not risen perhaps 80%, which is not much more than the inverse of the change in general interest rates. As a result, I'd expect the price of large projects to decline by 17% and a 50% decline in the price of duplex and fourplex units. These people who bought duplexes at a 2% Cap Rate will have their heads handed to them, or become a lifelong landlord-slave for a miserable 2% return. As you suggest, on a nominal basis, this will be masked to the degree there are rent increases due to monetary devaluation. .