Multifamily Cap Rates

[Joshua Ferrari]

What is everyone seeing, on the commercial multifamily side of things, in respect to cap rates during this market cycle? I've got a deal at a 6.82% cap rate, and a partner saying that's too low. What is everyone else seeing? 

[David Lilley]

@Joshua Ferrari cap rates are most useful for valuing a property when you are selling. Specifically, being able to determine the potential value of a property you can achieve by raising rents. Knowing the cap rate when you are buying is of little help. I have purchased a NEGATIVE cap rate deal because it was a massive value add and the other metrics in that scenario (IRR, equity multiple) were more important pieces of data.

So, you are right to be focusing your attention on the IRR versus the cap rate.