Commercial Investing in Los Angeles

7 Replies

What is the average Cap Rate in North Hollywood and Echo Park?

OR 

Where can I find the Average Cap Rate of each Neighborhood in LA County/ San Fernando?

That's a pretty broad question. Some additional color on these points would be helpful to answer your question:

-Property type (ie. office, retail, multi-family, hotel, etc.)

-Property class (ie. A, B, C etc.) 

I'd suggest checking out market reports the national and local brokerage shops put out (ie. CBRE, Marcus & Millichap, VOIT, etc), research on LoopNet and/or call a local broker and pick their brain/have them send you comps related to the property types you're interest in (best approach IMO).

@Kevin Akb Thank you for your response,

I should've specified more about the property, truth is I've just started looking at Commercial properties as opposed to Single Family Residential Properties.

But I do appreciate the resources you've provided. LoopNet is already giving me a general understanding of what I'm looking for. Once I'm more in a position to make an offer I will speak to a local broker and get a further understanding.

Thank you.

I would recommend, as someone else did, that you just start by looking at recently listed and sold properties that are similar to what you're interested in a begin to look for trends or similarities...For any credit tenant, your CAP rate is going to vary more significantly based on the Tenant than the neighborhood. Assuming it's not an absolute warzone. You're buying the future cashflows of the property so a corporate signature McDonald's is going to trade for a similar CAP rate across the country, all other things equal ( term remaining, scheduled increases, NNN or Absolute, etc.)

If you are looking at some kind of local single or multi tenant building, then your local market will have a larger effect to factor for likelihood of replacing a tenant should they leave. Ultimately though, a CAP rate is only an indicator of risk and the chance that the cash flow will remain and continue as scheduled. A higher CAP rate is not necessarily indicative of a better return.

@Iago Noya No worries. 

Frankly, don't hesitate to pick up the phone and call local brokers. Some will be more helpful than others, so call a few.

If it makes you feel more comfortable, try calling a small, local shop (check Yelp, etc) rather than a rainmaker at a national shop. A quick 5 minute conversation can save hours of online research and give you big picture guidance.

But do have some general criteria to provide, like I mentioned above, as well as your price point, so you're taken serious, but don't overthink it.

@Iago Noya The question is pretty broad but I can tell you. You will be looking around 3-4 cap in A class neighborhood. 4-5 cap in b class. 5-6 maybe in c class and 6 and up in the hood. Again...this is a rough estimate since it has many more variables like what others mentioned. But this is the gist of it. Hope that answers your question at least to get you started 

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