How can I find out the Cap Rate in the Bay Area, CA

Question

I don't have any MLS access....so it's hard for me to pull comps. Does anybody know a good resource for finding the cap rate for multi-family units in the Bay Area, CA? Alameda County in particular.

Shannon M. · Answer

Small time multi-family investor/broker from midwest here.
A few observations; The cap rates listed on Loopnet tend to be very optimistic. They tend not to take into account things like purchasing costs (survey, appraisal etc) and vacancies. Sometimes they end up being "the cap rate that could be" not the cap rate that is.

My other comment is that cap rate can be a dangerous number. Certain investors I worked with looked only at cap rate. Is a 10 cap a good deal? Who knows? It depends on How much you are paying for your money. Cap rate does not take the cost of capitol into account.

H Mann, I am not suggesting you do not already know these things, shoot if you are putting a 20 million deal together you may have forgotten more about this game than I know.
Good Luck

Michael Rossi · Answer

Who cares what the market cap rate is? Buying at the market cap rate is almost a certain guarantee that you will lose money on the property. In fact, I challenge anyone to tell me who has accurate expense data for properties that have been sold in an area so that they can calculate an accurate NOI?

Mike

Chris H. · Answer

As RyanBod said, check out www.loopnet.com.

Loopnet is actually located in San Fransisco, and can provide you with seller produced information. Remember though, that this is what the SELLER says. I would suggest contacting the listing agent selling the property and getting the rent rolls for the past year(at least), as well as the balance sheet and the income statements for the past 3 years (if possible). The cap rate is, IMHO very subjective. Pour over the income statement and check out loopnet to figure out comp cap rates, which should give you ammo to send to the selling listing agent to explain why you believe the property is worth as much as you are offering.

Goodluck!

Champak Shah · Answer

I am surprised that there is NO Price listed--

Is that in Foreclosure ? Does owner really want to sell ? What kind of RE Agent / Broker listing the property ?

Best to visit the proerty - ask ofr review of ;last two years tax returns --  do not take their given NOI  --some times--if it is operated by Management Company --  theer are many overheads --and high expenses ---

You can contact Local Apartment Management Compnies, Some Lenders --
for Market Cap rate in your  area --you need to know the type - category of apartments  --
Upscale luxury  or middle class --

Make a list of five or ten apartment complexes in your area --then go to court house and find owners --and talk to them --  run by some numbers and see at what price they will offer to buy from you --

You can also talk to appraisors in yoru area --who specializes in  apartments  --will have good info

Tomas Janik · Answer

Hello H Mann, 
I would be happy to provide you any info or comps, without any obligations.

I am an agent with prudential realty and we do investment properties in Bay Area as well.

contact me at your convenience, and I would be happy to assist your needs.

sincerely, 
Tomas

Account Closed · Answer

I can tell you this much.  If you go to loopnet.com, you can see a lot of the mls listings.  Granted this won't show you what the actual cap is on purchases, only listings, but it's a decent start.
From what I've seen listed in the Bay area you are going to be hard pressed to find something that doesn't look like a war zone for even a 7.5 cap.

Tony Tomasek · Answer

It seems to me that you need to contact a good property management co. in the area.  They will have the inside track on the avg cap rate in the area.

Herm M. · Answer

Well I'm trying to determine the price that should be paid for the property.

Actually, there's no list price on it, so the agent wouldn't be able to tell me anyways.

I know that NOI is $2,000,000.

I can't put the purchase price over $25,000,000, which would be 8% cap.

I'm wondering if the seller would accept $22MM, which is 9% cap rate.

Actually, does this even matter? I've read that I should check the cap rate for recently sold properties to get an idea of what this property should be valued at.

However, how many local comps could I possibly find for 250 unit complexes??

Account Closed · Answer

Just call the listing agent and ask what it is for that particular property.

How can I find out the Cap Rate in the Bay Area, CA

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