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Updated over 5 years ago,

User Stats

518
Posts
283
Votes
Storm S.
  • Real Estate Agent
  • Santa Barbara, CA
283
Votes |
518
Posts

The impending market collapse

Storm S.
  • Real Estate Agent
  • Santa Barbara, CA
Posted

Sorry for the clickbait. Contrary to the title I don’t actually think the market is about to collapse. Last night I was evaluating a commercial multifamily deal and I was doing a discounted cash flow analysis. When building out my cash flow projections for the next 5 years. You have to make assumptions about what you think the market is going to do. For example you must estimate what rent growths, your vacancy rates, and your exit cap rate all will be. I picked my numbers based on my economic outlook that our real estate market is going to keep running along with growth slowing down until 2024 when rents will stop growing. I also predicted that vacancy rates would increase also at a slowing rate until then. And I predicted cap rates to rise just .2%. Do you think my assumptions are reasonable? Changing these assumptions can make a big difference in what the value of the property should be.