NetGain Signals Increase in Cap Rate Recommendations

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NetGain's National Income Property Index™ (NIPI™), the preeminent income property guide for increasing rate of return (ROI) and minimizing investment risk, has established that today's income property investments necessitate 7% capitalization rates.

NIPI™, the preeminent income property guide for increasing rate of return (ROI) and minimizing investment risk, has established that a cap rate adjustment is particularly important at this time as it appears we may be faced with the possibility of a weaker economy in the near future.

Consequently, even though the current NIPI™ capitalization rate recommendation is in the 6.5% to 7% range, NetGain recommends 7% as a more realistic consideration for fair income property value.

The real estate investment community includes an army of promoters who are paid fees for promoting their real estate investment opportunities. There are real estate agents, general partners, asset mangers, seminar presenters, qualified intermediaries for TIC, investment banking firms, etc. The message that they inevitably put forward consists of many different reasons why each real estate recommendation they offer is in the consumer's best interest.

In a strong bull market, it seems as though every one of the above has a surefire way of identifying a successful real estate investment. Some of the reasons used to sway the consumer are as follows: It's at a discount to replacement costs, the gross rent multiplier (GRM) is very low, it's below market, we have an income guarantee, the projected rents will generate cash flow, the property was mismanaged, the appraisal is conservative, we have below rate financing, etc.

Unfortunately, none of these reasons has anything to do with the intrinsic value of income property. The only method that requires an intrinsic analysis of the property's operations is the capitalization rate.

The National Income Property Index™ (NIPI™) provides investors with time-proven recommendations based on the two most crucial influences affecting the value of income property: Jobs and the cost of debt service. Based on monthly National Employment figures, NIPI™ provides recommendations on the most advantageous positive spread to negotiate when purchasing income property. It also calculates the current cost of debt service and recommends the best capitalization rate range that responds to the recommended positive spread based on up to date nationwide data.

Net Gain Real Estate is a wholly owned subsidiary of NetGainR.E.Inc. In addition NIPI™ and capitalization rate recommendations, investors may also find bi-monthly essays, a comprehensive due diligence checklist, an extensive question and answer section, and a composite index of REIT data at


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Robert Mann
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