Sacramento Cap Rates

[Kyle Murphy]

Hi everyone,

I’m considering investing in Sacramento and I wanted to see what cap rates investors are experiencing on Class B small commercial apartment buildings (5-10 units). I know there has been quite a bit of cap rate compression over the last 12 months, so I’d love to hear from anyone who has recently purchased a property to see what they getting. If you could specify the general area in which you invest that would be great.

Thanks!

[Kyle Murphy]

@Brian Serina Brian thanks for your response. Deferred maintenance and below market rents, among other things can abosolutely distort cap rates. Have you seen any best practices for estimating capex for a building?

Brian, based on your response and @Gordon Cuffe's response, it sounds like I should be shooting for a pro forma cap rate of ~6-7%. I would assume that most properties advertising 8-10% cap rates are not Class B buildings/tenants (maybe C/D) and are likely the type of properties to have more deferred maintenance. Would you agree?