A Question about CAP rate valuation.

[John Archer]

I'm looking at a Multifamily that is what I call a classic investor grade property. This question has to do with the CAP rate.

Current asking price is based on a CAP rate of 8.66. The average CAP for the city is about 7.6. I'm looking at a couple of negotiation options that will raise the CAP a couple more points. My question is, if raising the CAP rate to lower the purchase price could be considered similar to the MAP for SFR's?

John

[Erik Hatch]

Do you have any data for multifamily comps in the area? How are the demographics of the area? How is crime? What does employment look like? I think there a lot of metrics you can use in order to negotiate a better price besides what you will discover during due diligence. In my opinion you need to compare apples to apples, so multifamily CAP would not compare to SFR.