If you want rents to go down or to stay flat in a market, you're going to take a risk and buy a property with a low cap.

Now, for those of you that don't know today,

we're going to be discussing something that's been a big pain point for most of us in commercial

real estate. How are you buying assets today with such high interest rates? It's been such a problem over the last 12 to 18 months. Things have

been feeling as if it's just been stagflating. There hasn't been a lot of activity. There hasn't

been a lot of action. We were so used to that drug of two and three percent interest rates.

Even if you were buying a four cap, you still had what we call positive leverage.

Now, for those of you that don't know what positive leverage is, and this is something that I've

been hearing over the last couple of years. We did a recording on the Jake and Gino podcast

probably a couple of months ago now. We had a gentleman who swore by he was buying shopping

centers and stripped malls and retail.

I'm like, really, bro?

How are you making that happen?

He goes, it's very simple, Gino.

I'm using, you know, rates at 6, 7%, and I'm buying these shopping centers at 12, 13 caps.

So he has positive leverage.

He's buying a deal at a cap rate that is lower, or I'm

sorry, excuse me, he's buying a deal with a cap rate that is higher than what the cost of capital is.

So you have a 5% or 6% interest rate, your cap rates are 9, your positive leverage.

Now, what's going on right now is people are buying deals, right?

At six, seven percent and they're trying to buy them in three and four caps.

Now that works great when the market's doing really well, fantastic, and you're able to flip out.

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