This article comes to a conclusion that apartment tenants cannot pay more rent, so rents will not increase (much). Rents are already pushing limits of affordability.
Forbes Magazine: are-investors-paying-too-much-for-apartments
The writer also suggests that capitalization rates for apartment
properties will increase from their current, historically low levels. (By the cap rate going up, with a steady "NOI", the value of the property goes down).
The article says that "apartment loans are not completely
self-amortizing", which is not my experience. A twenty year loan on an
apartment property is paid off in twenty years, period. Most apartment buildings are sold, financed with a "debt coverage" cushion, and produce net cash flow. I haven't seen any with a balloon payment.
While he acknowledges that capital is cheap, and rents have gone up, he
appears to really believe that apartment owners will be forced to
refinance in a future of higher cap rates (and lower property values). He sees "maturity defaults" for owners of apartment buildings.
If anyone believes that, raise your hand. (I don't see anyone).
No comments:
Post a Comment