Cap Rate Data Source

12 Replies

I'm looking to get into multi-family investing.  I would like to become very familiar with 2-3 markets/sub-markets in addition to my home market (Fargo, ND).  

I would like to research macro rental data and trends for markets across the US.  Is there a data source where I can find at what cap rates multi-families are trading in all the MSAs across the country?

I know there is no free lunch, but I'd like to try to compare cap rates to employment growth (or lack of) to try find markets that offer attractive risk-adjusted returns.  

You need to look at what size you are focusing on for the data.

There is also subsets of LIHTC properties, section 8, assisted living, etc.

Micro data in specific markets is best when analyzing a property.

By size I mean number of units (doors) for the complex.

6-24 unit apartments.  At this point, I'm only looking at traditional housing.  

Purchase prices up to $3 million.

I really want to focus on identifying a few key markets to really dig into.  Would a better way  be to simply analyze general economic data and then dig into the cap rates?

I found that the local credit union or bank, commercial brokers (be careful, many realtors will tell you they sell commercial properties but have no idea how to value a property) along with appraisers can be great sources. They see what's selling. Build a relationship with any of those and ask.

My goal was to review sales data and cap rates for a bunch of markets and then drill down into a handful of markets.

It sounds like that cap rate data might not be available for many markets from one data source??

Korpacz Real Estate Investor Survey

You'll pay a lot for current information and that's what you'll need for purchases.  Each city has a Business Times and if you subscribe to one you can usually get all cities online.

Also what ever Broker you are working with will have this information. Since apartments don't have long term above or below market rents a GRM of similar buildings will be a lot easier to get and will probably be more accurate estimating value for under 50 unit deals.

Thanks Bob!  Looks like I'll probably just start approaching this from a top-down view (analyze the metro areas macroeconomic trends) and then reach out to brokers to dig into each market and submarket that has positive population/growth/economic trends.

I would also warn you to be skeptical of cap rates on specific deals. There are a ton of different to calculate and report them. For example, are we giving a cap rate on the pro forma year 1 cash flow, trailing 3 month NOI adjusted, trailing 12 month NOI adjusted, etc.? They are calculate many different ways and reported inconsistently. Definitely focus on overall market trends.

Some of the larger commercial brokerages publish multi-family market reports which include the top markets and spend a page or two discussing each city and their economic trends. Marcus & Millichap, CBRE, etc. Usually they are free if you sign up on their website. Then there are pay sites like that have more specific market research reports available. They may have what you're looking for. I'm just investigating all this right now myself.

Business friendly state, landlord friendly tenant laws, fast eviction timelines also factor a lot into buying multifamily.

In general most warmer climate states are headed for growth as retirees in the tens of millions migrate to sunshine states. The rust belt states with cold weather except for urban core many of those markets are suffering and the economies and jobs are evaporating.

Almost all my clients are buying in warm climate states.  

Thanks guys, good insights!

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