LA 4-Plex Cap Rate

What is a good CAP rate to use for Los Angeles properties (4-plexes)? Do you expect it to increase?

Comments(5)

  • NewKidInTown323rd January, 2009

    The sales comps for a four-plex and market rent will influence the cap rate. If prices are still falling and rents are increasing, then cap rate should go up.

    If you are buying a four-plex, I would not look at the cap rate. I would look at the cash flow the property generates and the yield on my invested capital to make my purchase decision.

  • Snowball00023rd January, 2009

    Cool. What is historical cash-on-cash CAGR for Los Angeles 4-plexes?

  • cjmazur23rd January, 2009

    You really need to know the area.

    S. Central LA, will have radically different info than Santa Monica or ore of the non-rent controlled areas on the west side.

  • NewKidInTown323rd January, 2009

    Past results are not a reliable predicter of future prices . Furthermore, an average statistic for a large population sample can not be applied to a single property with any expectation of reliability.

    I think the historical CAGR is irrelevant in this market today. If I tell you that over the last 50 years, the growth rate has averaged 13%, can you expect a 13% growth rate next year? What if I tell you that for the past three years the CAGR has declined 17%? Does not mean a specific property you purchase this year will decline 17% in value next year.

    Even if CAGR shows an increasing trend, a specific property may not generate a positive cash flow. Buying a negative cash flow on the expectation of future price appreciation is speculating, not investing.

    [ Edited by NewKidInTown3 on Date 01/23/2009 ]

  • cjmazur3rd February, 2009

    I ran into a company called pinnacle something... sounded very interesting..

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