Hello All.. I am looking to purchase a multi-unit in SF, I have seen CAP rates ranging from 4.2 to 7.1%, what is the average cap rate in SF

Asked by Muhammad, San Francisco, CA Wed Sep 5, 2012

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Helen Yuen, Agent, Oakland Ca 94605, CA
Wed Sep 5, 2012
Muhammad:

CAP RATE = net operating income
--------------------------------
cost (value)

Average is 5 to 6 %

Consider also :condition of the building
how long you may want to hold the investment
if you like the neighborhood
good tenants etc.

Helen Yuen, Land & Property Investment, Inc (415) 469-0577
helenyuen@lpirealtor.com
0 votes
Jed Lane, Agent, Petaluma, CA
Wed Sep 5, 2012
Take the two you have, add them together then divide by two to get the average.
If you are really serious about buying an income property you need to get much more educated about the product and this area. I hope that isn't too blunt but your question shows a level of knowledge that is really just skimming the surface.
Most of the answers you will get here will tell you about rent control and how the specific neighborhood will affect the capitalization rate. Going further will require you to sit with someone knowledgeable, having a long discussion on all the other variables that can affect your rate of return on investment. There are many reasons to buy multi-family properties in SF, usually high cap rates are not among them. You can do better in the suburbs.
0 votes
Michael Cheng, Agent, San Jose, CA
Wed Sep 5, 2012
Most of the projects I've looked at have averaged between 5-6% CAPs, ok but not that sexy. With the popularity of SF properties, I see no reason why that would change. The only way to improve your CAP rate is to hold for 10-20 years. Then, you'll start to get the double-digit CAP rates that's possible in the south bay.
Web Reference:  http://www.archershomes.com
0 votes
Oggi Kashi, Agent, San Francisco, CA
Wed Sep 5, 2012
The cap rate will depend on many factors (property condition, tenant status, location, physical and rental restrictions, current rents compared to market rents, vacant units, etc.) so there is no dependable average figure. Generally speaking, if the property is in great condition with rents near market value or delivered vacant, the cap rate could be as low as 2-3%. If on the other hand the property has lots of issues, then the cap rate might be in the 6-8% range.

Oggi Kashi
Broker Associate, Paragon Real Estate Group CA DRE 01844627
All data from sources deemed reliable but subject to errors and omissions, and not warranted. truonly
Web Reference:  http://www.oggikashi.com
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