| Cap rates are going up nationwide, but accepting | | | | area surrounded by affluent suburbs, the property |
| this notion as all encompassing does disservice to a | | | | would require a much different valuation than the |
| market filled with tenant disparity. If one surveyed | | | | overall numbers would project. A property with the |
| the nation they would undoubtedly find properties | | | | right location can be worth the low cap rates; even if |
| which are suffering, as well as those who continue to | | | | nationwide they are rising. |
| prosper. Though the big numbers say cap rates are | | | | Real estate is not like an automobile. A car in |
| going up, buyers shouldn’t scoff at properties | | | | Washington D.C. is going to be the same as one in |
| with low cap rates. They may well deserve them. | | | | Wyoming. However, a property in Washington D.C. |
| Take a case involving an Arby’s (NYSE:WEN) for | | | | will be radically different (value wise) than that of |
| example. Recent sales have had cap rates as high as | | | | Wyoming. Though the lure of high cap rates may be |
| 10.07% and 14.85% and Arby’s has posted an | | | | great, their applicable properties may not be deal |
| average rate of 8.40% over the past six months. So | | | | they appear to be. Would you rather have a high cap |
| if an owner tried to market one for 7.50% to 7.75%, | | | | rate property in Wyoming or one with a lower rate in |
| one would have to wonder what he was thinking, | | | | the D.C. area? Certainly it would depend on the |
| right? But go back to Rules 1-3 of real estate: | | | | investor but it would be prudent to keep in mind the |
| it’s Location, Location, Location. If that | | | | oldest rule of real estate when making deals in this |
| Arby’s happens to be located in the DC metro | | | | brave new world. |