Quote from @David C.:
Excellent question. I’ve been wondering that same thing.
Seems to me when comparing candidate investments, why would I pay more for an investment with risk and work (5% Cap multifamily), than a risk-free passive investment (5% CD or T-Bill).
Note that going from a cap rate of 5% to 10% is a 50% drop in price…that’s significant…easy to see why a seller isn’t willing to give a higher return.
I’ve asked the question before and gotten answers like it’s because investor borrowing costs vary, and you must consider future rent growth and appreciation … I guess if you have low borrowing costs and are optimistic about the future a 5% cap rate makes sense.
that's just a bunch of bull from agents and gurus trying to keep their game going... of course price should drop 50%... say today the commeercial loans are at 7%, and cap should be 2% higher to make the risk worth while, so call it a 9% cap.
patience... this bs market needs cleansing... and when the time comes, it will be easy picking.
no need to play the hard game... my friend