What is the CAP rate for a 4,800 square foot industrial property in Venice, California?

In Market Conditions - Asked by Mark G. - Mar 11, 2010
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Answer(s)

George E.
Broker/Agent
Spring Hill, FL

Cap rates have been changing daily. The reason for this is that bank interest rates are changing. It used to be that a 7-8% cap rate was sufficient to cover a debt service ratio of 1.25. with 30% down. If the interest rate is raised or if the down payment is not high enough the cap rate would have to change in order to accomodate the debt service ratio for lending. If you do not need finance then you would have to consider your circumstances, such as does depreciation give you tax advantages? What is the actual cash on cash return. Are you buying so you have future equity or cash flow for today? Are rents increasing or decreasing? What are the market vacancy factors? I know this sounds confusing but with a knowledgeable commercial broker you should be able to sort out your goals and work your deals towards that goal with your offers. One building may make sense at a 8% cap and another only at 11% cap..

Mar 11, 2010
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Chris S.
Broker/Agent
Coeur D'alene, ID

All depends on the specifics of the property ... location, physical condition, tenancy, term on the lease, etc. I can support anything from 5% to 15% pretty easily based on the differences in the items above.

Mar 11, 2013
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Ryo T.
Broker/Agent
Los Angeles, CA

Mark,
Cap rates theoretically only apply to properties that have stabilized cash flows. 'Stabilized' means that the property is leased at market rent levels. If it is not, then the best thing to do is to perform a discounted cash flow analysis, which produces the proper cap rate as a by-product. If you need help, let me know.

Mar 12, 2013
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