An investor recently asked:
How do I evaluate Capitalization Rate on an apartment building priced at $1.3m with gross rents of $84,000?
The Capitalization Rate of an apartment building is used to measure its value against other assets in a similar class. The Capitalization Rate is built on the Net Operating Income which must accurately reflect the fixed expenses of an investment property.

Gross rents use to be the standard way to measure the value of an apartment building. It was a simple formula, for example; a building priced at $1.3m with gross annual rents of $84,000, would have a GRM or Gross Rent Multiplier of 15.48. Simply use this formula:
$1,300,000 / $84,000 = 15.48 or PP / Gross rents = GRM (more…)

Filed under Investing in Multi-Family, Uncategorized · Tagged with capitalization rate, GRM, gross rent multiplier, net operating income, apartment building values, cap rate, multi-family investing, multi-family real estate

I had the pleasure of listening to Richard Knudsen talk about the apartment market in the Bay Area at the local IMF meeting. Richard is an extremely knowledgable veteran broker who is respected by many in the industry. Later I met with Richard to discuss the multi-family housing market and brokerage business in general. Below are the slides from his talk, please take a look at slide #6, it speaks for itself.

Presented By: Richard Knutson, CCIM

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Filed under Investing in Multi-Family, Market Conditions, Property Management · Tagged with capitalization rate, investing in apartment buildings, property management, east bay apartment broker, cash flow, bay area wealth builders, investing, job growth, apartment buildings in the bay area, cap rate, apartment building sales, commercial real estate, purchasing commercial real estate in the san francisco bay area, cash flow multi-family real estate, cash flow property for sale, investing in multi-family real estate