High market and Multi-family

[Tejas Kotecha]

Hi all, 

I have a question regarding value of Multifamily. 

As I understand one use cap-rate to value a multifamily property and not comps. So, I wonder how does an up market, impact multifamily values. 

Is it just high rents resulting in higher NOI so resultant valuation is higher or there are other factors at play?

Thanks

[Steve Olafson]

Income growth is a major factor for growth in property value. 

Another factor in valuation is desirability.  Cap rates compress when there are lots of buyers.

Interest rates will have an affect as well. 

You would benefit by looking at what the factors are that drive the rent growth.  Lack of availability is the main reason and there are a number of reasons for that.

 - New product supply

 - population growth

 - job growth

 - cost of construction

 - cost of land

Basically job/population growth coupled with barriers to entry will help drive rents.  I like to buy when the projection are strong from my data but the rental market is soft due to some factor (oversupply of available units).  Then sell when the market is strong.