Boulder Commercial Real Estate: An Investing Haven
Ever heard of how the Japanese Yin and the Swiss Franc are considered haven currencies? In the face of geopolitical risk and weak bond markets, these currencies tend to hold their value.
The city of Boulder is real estate’s version of a safe haven currency. It’s historically resilient real estate market is an attractive option for investors in times like these, when the stock market is volatile, interest rates are on the rise, and the bond market is in shambles.
Investors are on the hunt for safer places to invest their money and many have turned to Boulder’s real estate market. However, with all the product being swept up, inventory is very tight. There were only two multi-family housing (MUH) properties available in the city limits of Boulder at the time of this publishing and only one more in the entire county, for example.
And what is the trade-off for a safer investment?
Lower cap rates. Remember, cap rates are calculated by dividing net operative income (NOI), which is income minus operating expenses, by the property’s purchase price. So if the purchase price is higher, relative to the property’s income, the cap rate is going to be lower. That is currently the case for Boulder MUH properties, which in the city limits, are now trading below 5% on a cap rate basis.
You can look beyond the city of Boulder for properties with better cap rates. Longmont, for example, has properties available with cap rates approaching 6% or greater. However, with higher reward comes higher risk. While cap rates might be slighter higher, vacancy rates and turnovers tend to also be higher. Which is why many investors in this climate are willing to invest in Boulder properties: they are trading lower cap rates for safer investments.
And what is the trade-off for a vigorous real estate market?
Just as the Japanese and Swiss occasionally resent having the so-called haven currencies (because it drives inflation for these steadfast savers), being a haven for real estate is good for the economy, but it also drives costs for Boulder businesses and residents.
Real estate is often an exercise of pros and cons, risks and rewards. If you are interested in learning more about Boulder real estate, contact us. We would love to talk you through the risks and rewards as it relates to your goals.
