Berkeley Multi-Fam 4.4% Cap

It’s not on the MLS yet it seems.

Here is the Offering Memorandum.

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Cap is too low for a rent controlled city. Pass.

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That part of Berkeley is very close to Cal campus. If most of tenants are students rent control may not be that bad an issue. But yeah I would be very careful buying any rent controlled properties in Berkeley.

What cap do you guys look for in rent control city? And what cap for non-controlled city?

It says $262k annual revenue, which works out to be $1562/month per unit (total 14 units). Current CAP is 4.4% but market CAP is 5.2%. Market CAP refers to when rents were at market level? So current rent is not that much below market level then.

it’s 8 units (2 1br, 4 2br, 1 3br). but not too far below market rent. that said, the risks of rent control with JCE will make me want to have a cushion in the cap rate

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Dunno. I don’t buy in cities with rent control. and if AB 1482 passes, I will stop buying RE.

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I see. I misread the flyer and thought there were 14 units. Then rent is basically at market, which I think will lead to a healthy turnover rate.

Okay, what about non-rent control cities?

Our recent purchases have been around 3 cap on paper at time of purchase and ended up 5-6 after we were done turning over. This is in the bay area where pricing is competitive :frowning:



Cap rates are usally lower than advertised. Often leaving out vacancies, repairs, stepped up property tax, and management fees…


Very true. Every advertised cap rate has never panned out if you ran it as purchased

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BTW my approach to RE investment may be a little different (not sure) to others. I am primarily trying to do interest rate arbitrage and take on leverage safely. So if I can conservatively run a property at 5-6 cap and can get financing at 3-4% LT, I am making money on every dollar of leverage. Inflation will help increase the gap, while economic downturns will shrink the gap. My investment is for long term and cashflow, and not appreciation (tho’ I will take it), which is why my preferred purchasing is for MFH. Now since I want to be conservative to ensure the above pans out, I buy in the Bay Area to ensure I can control costs and know exactly what I have in the hand. That said, I think our (wifey and I) run in RE is done. We are not going to buy anymore for multiple reasons, and we just need to nurse what we have along.


Not exactly the same but I do check that cashflow rate is higher than mortgage interest rate.
For comparison purposes, most people don’t include property management and asset replacement in cap rate computation.

Multiple = undisclosed :face_with_hand_over_mouth:

Nothing too mysterious. Young kids, Insufficient time to manage more properties, need to diversify assets (too much RE)

Check out the latest news as of today — Bill Text - AB-1482 Tenant Protection Act of 2019: tenancy: rent caps. Sept 6, 2019 - AB1482 has been modified —

If you have a SFH / condo / townhome and the owner of the property is not a REIT, not a Corporation, and not an LLC where one member is a corp, then the property is exempt from statewide rent control.

If the property is MFH, then it is subject to statewide rent control unless the property is 15 years old or newer.


Yah that’s why I am done with MFH RE if 1482 passes. Tho’ there is a big loophole in there. Go all the way down to the end of the bill. It says you can still terminate the lease without just case, you just have to pay relocation assistance. So basically it’s just a way to force landlords to pay tenants to move them out. But at least they created an escape clause in there.

Given AB1482, if it passes, (and it may very well pass), we will now have rent-controlled-STATE. For the next ten years, rent would be capped at 5% + CPI or 10%, whichever is lower.

This would apply to MFH older than 15 years, but not to “Residential real property that is alienable separate from the title to any other dwelling unit” assuming the owner is not one of the classes (corporation, etc.) that I mentioned above.

I am less concerned about the cap on rent increases (i think 5% + CPI is fair) as long there is no vacancy decontrol. I am more concerned about JCE. The only saving grace to AB 1482 is that while it says it’s doing JCE, it still allows you to term a tenant without cause as long as you pay them off

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