Title. I have been reading basic technicals and I thought that a lower cap rate meant an higher property value. So could cap rate become too low that it becomes a probelm, and what is a good cap rate for sectors like multifamily and data centers
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not an issue when selling.....
Yes
You’re basically just asking whether a building can be overvalued. Yes.
If you're getting up to some accounting and tax shenanigans then it certainly doesn't pay to draw the IRS' attention with too rich of a sale...
Austin multifamily has entered the chat…
What kind of cap. rates are you seeing? Just curious.
Couple Multi-Family projects ay 3.75-4.25. Could only imagine what the cap would be for that office building Kilroy bought
Can a property be overvalued? Yeah...
If you're the seller, then absolutely not. I'll sell you this 10 unit MF building for a 0.1% cap all day.
Only other point I'll add is that if your cap rate is below the financing you can get, then you're going to have problems.
Cap rate is basically annual return. cap rate - rfr = risk premium. So while as mentioned here properties can be overvalued a low cap rate is prevalent is less risky locations. In NYC, you can get 6-7% cap rates in deep Q/BX/BK but in the west village you're =4% because how well established the value of prime manhattan is.
What is rfr
Risk free rate. Comes from the treasury department I believe.
Loaded question because “cap rate” is never the only factor when investing money. On paper you can buy a 2% low cap rate but in place rents could suck. Your stabilized yield could be much better.
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