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When interest rates are higher and less debt is available in the market, David Sobelman, CEO and President for Generation Income Properties, says net lease underwriting is disciplined and deals are heavily scrutinized. But when interest rates are low and debt is readily available, unsophisticated buyers come in and make mistakes.

“They may have never owned an expensive, asset-management-intensive commercial real estate property before,” Sobelman says. “These are typically the least sophisticated investors who look less at a real estate asset’s intrinsic underwriting measures than someone who is actively looking to own and manage assets as a full-time profession.” Right now, rates are low, and that could lead to problems, according to Sobelman.

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