Multifamily Cap Rate in Different Cities

Economy & Finance
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Out of curiosity I want to know what’s the typical cap rates for apartments in different metros. I will update the list as I do research on more and more locales. All numbers are medians on loopnet listings.

Stockton: 7%
Sacramento: 6%
Fresno: 7%
Bakersfield: 7%
Riverside: 5%
San Bernardino: 6.5%

Bay Area towns:
Fairfield: 6.3%
Richmond: 7%
Oakland: 4.6%
Hayward: 4%
San Jose: 4.3%
San Mateo Co: 4%
San Francisco: 4.1% (lots of listings!)

Out of State:
Las Vegas: 7%
Phoenix: 7% (tons of listings!)
Portland: 5.6%
Seattle: 5%
Dallas: 5.7%
Houston: 7%
Austin: 6%
Orlando: 8% !!
Tampa: 9% :heart_eyes:
Daytona Beach: 9% :heart_eyes:

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If you are tough and big and don’t mind owning multi-fam in Bay Area (please don’t do it), Richmond offers pretty strong cash flow at 7%. But we are likely dealing with pretty low end tenants.

Stockton, Sac, Fresno and Bakersfield, up and down Hwy 99 also offers pretty strong cash flow at 6-7%. Probably don’t need to go down to SoCal.

Popular investment towns like LV, Phoenix, Texas etc actually don’t seem to be worth the trouble. The best they can do is 7 Cap and we have 7 Cap close to home in Stockton and Sac. Plus we have the ultimate landlord enrichment scheme in Prop 13. Why bother?

BUT WHAT’S THE DEAL WITH FLORIDA?!!! YES I AM SCREAMING!! Tampa has 9 Cap?!! Orlando 8 Cap?!! What’s going on?

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Euphemisms. .Cash cow=high cap rate…Pride of ownership=low cap rate.
Like the difference between low yield bonds and junk bonds…Your portfolio should have both…
If you want high caps try self storage 8-9, or trailer parks often over 20…High caps generally mean high maintenance and management headaches…

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4

Cap rate doesn’t include maintenance & property management?

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I think it does…Mançh?..

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The big money in high cap areas is to build and sell…These areas have lower appreciation than low cap areas…Build take your money and run…That has been my investment strategy in Texas and Florida and will be in Phoenix. .Sometime the best returns are in building and flipping not buying and holding, especially with areas with no barriers to entry. …usally found in high cap areas…South Dakota was a great place to do that 5 years ago…

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Yes it does. Anyway it’s self reporting by agents so they can always fudge the numbers.

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8

Building and selling no doubt makes lots of money. But that’s a job not investing. I already have a job and looking for passive income that can last for decades. Residential is more straightforward than commercial like self storage because everybody needs a place to live. But I will look into that as well. Makes sense to have some of everything in a portfolio.

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Vacation island, harden shelters, agriculture land…

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This is a mobile home park in Tampa. 14 Cap.

37 spaces. Asking 1.2M. Gross income 210K. Expenses 80K. Net 130K. Looks like a cash cow.

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If it’s so lucrative somebody would have already jumped…there must be a catch.

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Anyone build in Florida? How hard is it (permitting, etc) ? I think someone mentions the trades are Lazy and slow?

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The catch is they underestimate the maintenance, repairs and vacancy rate.

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It does,here is how to calculate cap rate

15

High cap rate in a major metro area should perform well in a recession. Low cap rate gives worse foreclosure risks.

But multifamily foreclosure is pretty rare. Owner occupied houses are the most risky in terms of foreclosure

16

How about replacement of appliances? HOA? Vacancy allowance?

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For a second I though the $40k house was renting for $9k/mo!

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All expenses must be deducted first, except mortgage, to get net income.

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I know three owners who purchased, during 1995-6, homes at 250k - 350k range renting it at $4000+ now. It happens when you hold long !

Either stock (good ones) or home at good location, you hold long, is a cash cow !

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20

Vacancy is not an expense, it reduces income. I think some of you compute cap rate assuming no vacancy. IMHO, should allow 1 month vacancy for each year. For houses in mid west or snow area, I suspect might have to use 3-6 months vacancy which chop cap rate by 50% e.g. your example of 15.7% would become 7.8%. Lifespan of appliances could be pretty short for those areas too. So…