“Cap Rates” on Residential Investment Properties Going Down…?

There’s a lot of money looking for Residential Investment Real Estate

I got this article from a Multifamily Executive, an online trade magazine I subscribe to.

The article among other things discusses the “capitalization rate” of some investment properties in various parts of the country and how the old rules of thumb in evaluating a deal don’t seem to be relevant in today’s market.

Click Here for the article

Now while the author of the piece is discussing large multi-million dollar deals…. the metrics he’s talking about apply to Residential Investment Real Estate on the smaller scale as well.

I’m seeing multiple offers on Duplexes and Four-plexes here in the Sacramento Region that are beginning to remind me of the market about 10 years ago. An example I’ll cite here is a Duplex we just closed escrow on located at 10206-10208 South White Rock Rd., Rancho Cordova.    We listed it at $259,000 with a Cap Rate at just a shade over 6%.

With multiple offers coming at this one, the price ultimately wound up at $273,000 and the Buyer, in addition to that, accepting about $4,000 in “deferred” maintenance regarding some dry rot issues on the exterior.

If that result is not the definition of a Seller’s market I don’t know what is. Just thought I’d pass on the good news if you’re thinking of Selling.

In the Mean Time…?

Make it a Great Day..!

Ed Favinger, Broker, CRS, GRI, SFR, CDPE

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