Emerging Trends Advice – “Back off the sub-6 cap rate deals”

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“Back off the sub-6 cap rate deals on existing properties, where you have much less room for error” should interest rates increase, and steer clear of garden apartments in suburban areas where new development can spring up easily and soften returns on older product. Some of these low-barrier-to entry places could suffer from oversupply by 2014 or 2015: ‘Multifamily is almost guaranteed to overdevelop,’ according to one interviewee. Particularly watch out in high-foreclosure markets where speculators will turn single-family homes into rentals and compete directly against apartment owners for tenants.”

http://www.pwc.com/en_US/us/asset-management/real-estate/assets/pwc-emerging-trends-in-real-estate-2013.pdf

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