Cap Rate situationship?

[Michael L.]

Let me know if I'm over thinking this pls. I overstand that the market determines the cap rate, does the age of a building play into that too or is that only a factor when it comes to the deal itself? 

[Michael K Gallagher]

hey @Michael L. in short the answer to your question is "kinda".  A "caprate" in and of itself is deal specific, not market specific.  But what tends to happen, as you are eluding to, is that the "cap rate" that an asset or a building sells for in a certain area, in a certain condition, will begin to tell you a trend of what the "market cap rate" is.  To your point it is used as a way to compare dis-similar properties across a market.  

The age of a building in my mind indirectly impacts the caprate.  In that a buyer is willing to pay less for a building the older or more in disrepair it is. So yes if a building is older, it will tend to trade for a higher caprate (lower price) than its comparable younger properties.  If you get a chance to see Ashley Wilson from Bar Down investments speak about the "caprate Con" ever, take the chance its a fantastic presentation she has put together on how the caprate really is not all its made out to be in a deal.