Yes of course the old saying "location location location". I understand cap rates are not fixed or mandated to be a strict number. Cap rates are essentially a reflection of people's expectations, and are typically on a leash by market rates. A person can be selling a property with a NOI of $100k and ask $4m, the CAP rate will reflect that their expectations are too high (for an investor at least) and all the market factors, location, comps, fed rates, will put their expectations on a leash (or justify it).
I'm curious about that Stanford property. But take your Oakland prop at 10cap. Oakland has always been a higher cap rate for many decades as significantly more risks (gangs, break ins, graffiti), tenants squatting, vandalism. And to be frank, while it should be closer to a 15cap, its rare to even see a 10cap. Def not turnkey. For some reason their expectations are around 5cap which is a complete joke IMO.
With loan rates close to 8 you would think that should push cap rates higher. When rates were 2.5 just a few year ago cap rates were still 2.5 to 3, there very little change since then.
I'm hoping other investors can shed light on their expectations as buyers. Are you guys settling for a 3cap in Stanford or a 6cap in Oakland?
Collectivly, are investors like "yah these sellers are still high on crack, just wait it it out longer" or "There plenty of 'quality' 6-8cap in the greater bay area that's up for grabs you just gotta look *here*"
I feel like I'm missing something because **** is just not adding up. Esp when listening to BP in the car.
Another question I have for you guys, whats the point of going off proforma cap rates. My mentality is go off current cap rates. I've seen firms like marcus and millichap pitch 6CAP but in reality its only 3CAP, It's funny their proforma is pitching market rents, but their client is selling with rents that are tied up by county regulations at 50% of market rents, and it will take decades to get to the market rents.
