Finding Local Cap Rate
I am analuzing a sixplex in Philly and am finding it hard to locate someone that has command of what the cap rate in the area is. Obviously my offer is based on cap rate based valuation of the income. Does anyone know a good reliable way to find the cap rate for a locale?
Thanks!
Joe
[addsig]
It seems 8 cap is close to a universal benchmark as any. I would also check out l o o p n e t c o m
. Good people to know.
and try to find the most similar properties and the listing will indicate a cap rate. Dont take that as gospel as this may be a number an agent is trying to justify higher sale price but it may reveal some clues.
Try to find a friendly Commercial Appraiser, perhaps Commercial real estate agent (not so friendly <IMG SRC="images/forum/smilies/icon_smile.gif">
[ Edited by otter1 on Date 04/05/2008 ]
[ Edited by otter1 on Date 04/05/2008 ][ Edited by otter1 on Date 04/05/2008 ]
try networking w/ a broker that specialized in MF in the area. They have access to other tools such as costar and there own experience for this sort of info.
Some will give this info "on the come" of getting a deal from you. If the seller has it listed, there may be the kicker the broker needs.
try networking w/ a broker that specialized in MF in the area. They have access to other tools such as costar and there own experience for this sort of info.
Some will give this info "on the come" of getting a deal from you. If the seller has it listed, there may be the kicker the broker needs.
Thanks. I am not familiar with Costar. Can you shed light on that?
As for that Other Net service I will jump on that , and totally agree it could be nicely up-sold, if you may!
Regards!
Joe
_________________
Joe Callaghan
[ Edited by JoeGnome on Date 04/06/2008 ]
What cap rate do you want or need? If you know that number, and if you know the NOI for the property, then you can calculate your maximum offer.
It really depends on the area. For most areas in Philly it is usually about 8%. I have a CCIM that I work with as well. If you would like to know more about him, or about my investing in Philly area feel free to PM anytime.
Quote:
On 2008-04-05 14:55, JoeGnome wrote:
I am analuzing a sixplex in Philly and am finding it hard to locate someone that has command of what the cap rate in the area is. Obviously my offer is based on cap rate based valuation of the income. Does anyone know a good reliable way to find the cap rate for a locale?
Thanks!
Joe
www.costar.com offers a comprensive set of services for commercial real estate, rent data, comps, MLS service, etc.
I you mentioned you are measuring demand, and not risk.
A hazmat site commanding a 6 cap in Los Angeles and a 10 cap in Iodunk, IA (less demand) is still a risky proposition.
It may just be our symantics.
Yes It is semantics. I agree with your examples, but put another way, the same property in Podunk, IA at a 10% cap rate might command a 5% in downtown LA. Why? Because an investor or group of investors would feel that their investment is less risky in downtown Los Angeles DUE TO the higher demand.
So I agree that Cap rate is an indicator of demand, I just can correlate higher demand with lower investor risk. Certainly other factors apply.
The hardest thing I find about using the Cap rate is that you need to know Net Operating Income(NOI), and therefore expenses, of properties that are similar, nearby, and that you have a public record of the sales price. Annual NOI divided by sales price of the property is the Cap Rate. However you need to know expenses of the other Mplex units in the area that are reasonably well managed to determine the cap rate accurately and that is where my problem is. A one point difference in the cap rate of a Million dollar stated sales price is a lot. If you think the cap rate is 8% but it is really 7% then you are about to offer $120,000 lower than the actual, or if you think it is 8% and it is really 9% then your offer calculates out to be about $100k higher. So at a Million dollars a swing of 1% reflects by a factor of 10 in the actual price... in the scenario I am looking at.
I assume full time property managers have a handle on this number...
Regards!
Joe
As for the hazmat.... not for me.
I do this all the time- purchase and rehab with a HELOC, do a cash out refi based on the new appraised value, then use that money to re-fund the HELOC and do it again. No seasoning, no problems. Using cash on hand instead of a HELOC would be just the same.
Chris
Yes.
Chris
I absolutely agree. Anybody who wants a substantial up-front fee is a scam artist. I have never seen one of those deals close, Just asking for anything more than a few hundred dollars is enough to get me out shopping for another lender/broker.
Exceptions-- I will pay direct fees to third party consultants, appraisers, environmental consultants, etc. but thats about it.