The Azucena Take: Should I Sell or Should I Hold?

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As the pandemic gets under control and the economy starts to open, a sense of normalcy could be felt. Those who have prepared for this moment are already seeing the rewards of their investments. Many are also not satisfied with their current holdings and are looking to expand their portfolio. This is perfect since now is the time to buy.

Cap rates for commercial properties are facing downward pressure. As of June 2021, the cap rates for apartments, self-storage, medical offices, hospitality, and retail have been on the decline. This has been especially true with properties with 100 units or more. Meanwhile, the cap rates for office and senior housing have remained flat.

Here is a quick breakdown of the average cap rate of each property type:

  • Apartments are around 3%

  • Retail-ST is under 5%

  • Self-Storage is around 5%

  • Industrial is dropping to 3%

  • Retail-MT is around 5%

  • Office is staying at 5%

  • Hospitality is above 6%

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At the same time, investors are worried about the proposed changes to the tax code. The biggest concerns are raising the capital gains tax along with the new changes and how it will affect their investment strategies.

Thus, investors are asking themselves: should I sell or should I hold?

Like any complicated choice, such a question cannot be answered with a simple yes or no answer. Instead, one should look at their options and plan a strategy that will allow them to gain the most without placing your holdings in a compromising position.

One should first speak to a professional (like the Azucena Group of Marcus & Millichap) to see what the options are. If you have properties that you want to sell, now would be the best time to do it. Look at which investments are not worth holding then sell them or replace it through a 1031 exchange. We could guide you on the best course of action so that you are prepared for the future.

Be aware that the markets could change in the next few months, so it's best to have numerous plans ready. Also, remember that the proposed changes to the tax code are only being proposed and nothing is set in stone yet (thus don’t just panic sell).

Investors should study the trends and work with experts to prepare their portfolios for what is to come.

Carlos Azucena