I should have bought that property 20 years ago...

How many times do you hear someone say " I wish I had been smart enough to buy that property 20 years ago"? Real estate has appreciated like few other invesmtents over time and I am writing a short idea on why todays market is not much different than the investment market in the early 9os,(almost 20 years ago) when I wish I had been old enough to buy real estate.

Back in the early 90s apartment building were selling near a 9% cap rate. (The cap rate is the first year return on the building, or the yield. It can be computed by dividing the NOI over the Purchase Price) Cap Rates work inversely to property values, so a high cap rate means the property costs less to buy. This was a good time for buyers.
Mortgages for this type of investment had interest rates of 10% or greater. So basically you are buying a property that returned 9%, but financing it with money that costs 10%. How did these people make money?

Well those people did make money. Fast forward to today.

Right now we can buy a building in a premier location for around a 6% cap (you can get buildings at better cap in areas besides Lincoln Park, Lakeview, etc. ) and finance it with money that costs 7%. Sounds like the early 90s if you ask me......