approx cap rates stuff is moving at

6 Replies

I see all kinds of SFH deals on here, not many in the multi unit space... At what cap rate do you guys see turn key properties moving at?

Have 40 units we may take some profit on up in ND.

Qualify turn key.

Has occupancy been at 85% or higher trailing the last 24 to 36 months?? If not getting financing at higher desired LTV's 75% for buyers will be difficult.

The banks or lender underwriting the loan will ask for more down with the occupancy percentages fluctuating outside of acceptable margins over time.

If you sold the 40 units would you 1031 into something else?? I see caps on Multifamily anywhere from a 3 cap all the way up into the double digits. It depends on not only the location of the property but local landlord laws, landlord paid utilities, tenant base, long term stabilization history of the property, and a ton of other factors.

Let's reverse your question. What CAP would make you sell your property?? Then take that number and apply it to your market locally. If all you are seeing is residential sales you might not be looking in the right place or network for comps. I know what stuff trades at everyday for retail/ triple net leasing and then larger apartment buildings because I review hundreds of properties a day.

People in the business as professionals know not only what properties trade at but also the required structure of the deal buyers and lenders are requesting to make it happen. I have commercial buyers always looking for property. I can always take a look at it and give my opinion.

Owned a year. Been running 97.5% occupancy while upping rents and redoing units along the way. Previous owners were always over 95% occupancy for the 10 years they had it. We bought private unlisted for a 9.2 cap, and have worked it up to a 10 cap (but spent significant profits from the year getting the rents bumped 10% in spots, and remodeling units in others, etc...)

Fargo is running about a 7 cap(hour away).

Yes, would likely 1031 into something else.

Hour is a lifetime for apartment CAPS. Is your property the only apartments in town??

Have you called or checked online to county or city tax assessor to get a list of other properties similar to yours close by??

Hour is too far away in my opinion to accurately get an exit cap in current market.

Working on helping some others get moved at an 8 cap(5 blocks away), which will likely happen by may 1.

There is about 400 units in town, most are held firmly and don't change hands often.

@Luke S. There should still be cap rate information that a local commercial broker can offer you. I have 3 Market reports for my region for the first quarter of 2014, and they survey the market, and offer stats. One of them has by area, cap rate ranges for pre 1990 and post 1990.

That would be the best place for you to find out the average cap. If your cap is "10%", and your local market average is 6.5, then you know you can raise the price by 3.5%.

Technically though, you shouldn't refer to it as raising the cap rate, because you shouldn't sell your place at the same price you purchased it at. I know that sounds obvious, but that would be the only way you could then say the cap rate is 10%. If that makes sense.

What you are actually doing, is increasing the value of the property, because your CAP rate should typically remain around the market average when the place is operating at its prime.

I wouldn't be selling it at a 10cap. I was just pointing out how we have added profitability to the project since we got it. I would be re-listing it at an 8cap obviously.

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