July Newsletter

Greetings from Ingram Capital!

As the temperatures rise here in Missouri, so do the opportunities with Ingram Capital! We’re excited to bring you our July newsletter, filled with important updates and valuable insights. This month, our Flipping Fund has closed on three new assets, demonstrating our commitment to delivering outstanding performance. Read on to learn more about our recent achievements and upcoming opportunities designed to maximize your investment potential. Let’s continue to build on our success as we move through the summer.

Upcoming Events in the CRE Space

Join Us at the Cash Flow Summit in Kansas City

We are thrilled to announce that we are hosting the Cash Flow Summit in Kansas City from October 23rd to October 25th. This will be the largest real estate event in Kansas City, featuring over 20 speakers who will delve into the intricacies of generating and managing cash flow. Whether you're a seasoned investor or new to the real estate market, this summit offers invaluable insights and networking opportunities.

Don’t miss out on this premier event! Get your tickets today and join us for an engaging and informative experience focused on maximizing cash flow and achieving financial independence.

CCC of KC Mid-Summer Mixer ~ Drinks and Design on the Plaza

Save the Date! Contractors, Closers & Connections (CCC) of Kansas City is excited to present our Mid-Summer Mixer ~ Drinks and Design on the Plaza, a Private Event for the CRE and AEC Professionals

We are excited to bring a variety of unique events to the CRE and AEC industries in the KC region throughout 2024!

Dress Code: Cocktail Attire Recommended

Registration is required to attend:

Market Trends and Insights  

Federal Reserve Chair Jerome Powell highlighted growing concerns about potential risks to the labor market due to high borrowing costs, as officials seek more evidence that inflation is slowing down.

In his address to lawmakers on Tuesday, Powell avoided specifying a timeline for potential interest rate cuts, although investors anticipate that cuts may start in September. He noted signs of a cooling job market, with government data from July 5 showing unemployment has increased for three consecutive months.

“Elevated inflation is not the only risk we face,” Powell stated in his prepared remarks to the Senate Banking Committee.

“The latest data show that labor-market conditions have now cooled considerably from where they were two years ago—and I wouldn’t have said that until the last couple of readings,” he added.

Powell is in Washington this week to deliver his semi-annual monetary policy testimony to Congress. His final appearance for this round will be before the House Financial Services Committee on Wednesday at 10 a.m.

The Fed has maintained its benchmark interest rate at its highest level in over two decades for nearly a year to combat inflation. While the job market has remained relatively stable, recent data indicating a slowdown has increased the pressure on Fed officials to consider easing monetary policy.

“His focus is squarely on the labor market,” said Derek Tang, an economist at LH Meyer, a policy analysis firm. “Further softening in the labor market, even if further disinflation is not delivered, is enough to spur action.”

However, Powell warned that reducing rates too quickly or excessively could hinder progress on lowering inflation, which has decreased from 7.1% in June 2022 to 2.6% in May.

“More good data would strengthen our confidence that inflation is moving sustainably toward 2%,” Powell said, indicating that the Federal Open Market Committee is unlikely to lower rates in its upcoming meeting on July 30-31.

Recent data showing a deceleration in inflation following a spike earlier in the year has been welcomed by Fed officials, but they remain cautious and are looking for more consistent trends before making any changes to borrowing costs.

The Bureau of Labor Statistics is set to release its monthly report on consumer prices on Thursday, with expectations of a 0.2% increase, excluding food and energy, for June. This would mark the smallest back-to-back gains since August.

Economists are increasingly warning of a potential slowdown in the job market. The number of people who have been job hunting for 15 weeks or more rose in June to its highest level since early 2022.

Powell’s comments reflect a shift in focus to labor market risks, balancing the Fed’s dual mandate of price stability and employment. Economist Anna Wong predicts that the unemployment rate could rise to 4.5% by the fourth quarter, leading the Fed to prioritize employment concerns by year-end.

Democratic lawmakers have expressed concerns about delaying rate cuts, citing rising unemployment, high housing costs, and a slowdown in manufacturing. Meanwhile, Republicans have mostly refrained from challenging these arguments.

“It is very clear the labor market has cooled considerably,” said Claudia Sahm, chief economist at New Century Advisors. “The alarm bells aren’t sounding right now, but you are certainly pointed in that direction.”

During the hearing, Powell also discussed a plan to increase capital requirements for the largest banks. He indicated that the Fed and other regulators are close to finalizing changes to the proposal, which could require the biggest banks to hold more capital as a safeguard against financial shocks.

Link to article: https://www.bloomberg.com/news/articles/2024-07-09/powell-says-more-good-inflation-data-would-boost-fed-confidence?cmpid=BBD070924_CUS&utm_medium=email&utm_source=newsletter&utm_term=240709&utm_campaign=closeamericas

Expert Tips and Strategies  

Beginner’s Guide to Cap Rate: Simplifying Property Value Assessment

Understanding Cap Rate

The Capitalization Rate, commonly known as Cap Rate, is a fundamental concept in real estate investing. It serves as a valuable tool for assessing the potential return on an investment property. Simplifying this concept can help both beginners and seasoned investors make more informed decisions. Here’s a breakdown of what Cap Rate is and how it can be utilized effectively:

1. What is Cap Rate?

   • The Cap Rate is a metric used to estimate the rate of return on a real estate investment property. It is calculated by dividing the net operating income (NOI) of the property by its current market value (or acquisition cost). The formula is: Cap Rate=Current Market ValueNet Operating Income (NOI)

2. Why is Cap Rate Important?

   • Evaluating Investment Potential: The Cap Rate provides a quick snapshot of a property’s profitability relative to its market value. A higher Cap Rate typically indicates a more profitable investment, while a lower Cap Rate may suggest a lower return on investment.

   • Comparing Properties: Investors use Cap Rate to compare the profitability of different properties. This comparison helps in making strategic decisions about which properties to invest in.

   • Risk Assessment: Cap Rate also reflects the risk associated with the investment. Higher Cap Rates usually correspond to higher risk, often found in emerging markets or properties requiring significant improvements. Conversely, lower Cap Rates are typically associated with lower-risk investments in stable, high-demand areas.

3. How to Calculate Cap Rate?

   • To calculate the Cap Rate, you need two key figures:

     • Net Operating Income (NOI): This is the annual income generated from the property after deducting all operating expenses, such as property management fees, maintenance, insurance, and property taxes.

     • Current Market Value: This is the price at which the property can currently be bought or sold.

   • Example Calculation: Suppose a property has an NOI of $100,000 and a current market value of $1,000,000. The Cap Rate would be: Cap Rate=1,000,000100,000=0.10 or 10% This means the property generates a 10% return on its market value annually.

4. Interpreting Cap Rate:

   • High Cap Rate: Indicates a higher return and potentially higher risk. These properties may be in less desirable locations or need significant improvements.

   • Low Cap Rate: Suggests a lower return and generally lower risk. These properties are often in prime locations with stable income streams.

5. Practical Tips for Using Cap Rate:

   • Benchmarking: Compare Cap Rates within the same market or property type to get a relative sense of value. Different markets have varying average Cap Rates, so always compare similar properties.

   • Trend Analysis: Look at how Cap Rates have changed over time in a particular area. A decreasing Cap Rate trend might indicate an appreciating market, while increasing Cap Rates could signal declining property values or higher perceived risk.

   • Consider Other Factors: While Cap Rate is a useful metric, it should not be the sole factor in decision-making. Consider other aspects like location, property condition, and future growth potential.

By understanding and utilizing the Cap Rate, investors can make more informed decisions, optimize their investment strategies, and achieve better returns in the commercial real estate market.

At Ingram Capital, we believe in giving back to our community and fostering meaningful connections within the industry. Here are some of our latest initiatives and upcoming events:

Supporting the United Way of Pettis County

Throughout the month of June, we dedicated our efforts to supporting the United Way of Pettis County by donating a portion of every car washed at Ingram Auto Spa. Thanks to your support, we raised $1,000 to help the United Way continue its important work in assisting individuals and families in Pettis County. Your contributions have made a significant impact, and we are proud to be part of such a generous community.