How can I find the CAP rates in a city, town or MSA to calculate value for Commercial Real Estate - Multi-Family?
Market is changing rapidly - again!
You'll have to learn the market, this is not a fixed rate, it changes depending on quality and location within a market area, this data is not well compiled anywhere that I know of, if it is it is very valuable info that people probably wouldn't give away for free.
@Harold Curtis , Aaron is right. Each market, submarket, class, etc has different Cap Rates. And you have to be careful because owners, buyers and sellers will quote CRs based on different bases. One might use T12 and another use T3 annualized while a third might base it on a pro forma. It's one of those rules of thumb that you have to be very careful with.
There are various publications that publish cap rates.
This cap rate data is an aggregate number taken from many deals so it will provide good ballpark guidance. Of course, this number must be adjusted for the specific property amd location.
The best way to learn is to get in the market - learn the properties - see what they trade for. That’s really the best way to get a handle on the market and the cap rates in that marlet.
Thank you all for your input.
I have noticed that properties in areas I am familiar with have been hugely increasing lately. This is good for properties I already own but makes it challenging to purchase additional assets.
I will take your advice to heart and negotiate my best deals for sure.
@Harold Curtis Rising and falling Cap Rates are like golf with your playing partners. Every swing makes someone happy!
In practice... you can:
A: Ask every broker and lender in the area what cap rates they're seeing in X submarket. You'll get a decent idea from there.
B: get a list of recent sales from any broker with access to costar, and try to get a hold of their offering materials to see what the T12 or T3 was, and do as quick a calculation as you can to verify or counter the opinions in A above.
C: Also, remember that your investing is personal, and prevailing cap rates will still need to line up with the speficic deal in your parameters and needs/wants. (if that makes sense).
@Harold Curtis it all depends on the area within the market and markets vary from location to location. Learning the market and knowing someone and networking in that market is important. Good luck!