A Wise Post, If I Say So Myself

The folks at HouseHunting101.com have a great post and link to a Forbes article about the value of real estate in the midwest.

Of course, being from S.E. Michigan, I’m a little biased.  However, I believe facts speak for themselves.

On the commercial side of real estate,  the coasts are getting hammered on their capitalization rates (1st year net operating income/value of the property). Their cap rates are down near the 3 and 4 percent range.  While here in the midwest, it is not uncommon to find cap rates around 7-10 percent.

Michigan, in particular the Detroit area, will see a jump in the cap rates above the midwestern average.  And when the cost of money is around 7.5 – 8 percent, well, most investors want a positive return on their money.  10% cap minus the cost of money at 8% = a 2% profit to the investor.

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