How can I find out market cap rate for Stockton & Sacramento CA when no comps available?

I am buying multi-unit apt complex in Stockton or in Sacramento CA. I am not able to get comps recently. I want to figure out market cap rate. My email: Thanks in advance.
In Buying Property - Asked by Komala V. - May 19, 2010
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David J.
Manhattan Beach, CA

Have Braunco do a market analysis

May 19, 2010
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Jeffrey S.
Longmont, CO

How about forgetting about comparable cap rates and calculate a price that the property can afford to pay in relation to your cost of financing?
Debt Coverage Ratio: DCR
Annual Mortgage Constant: AMC (the blended cost of all debt that will be on the property)
Loan to Value ratio: LTV (the combined debt divided by the price)
Capitalization rate: CAP = DCR * AMC * LTV
Then divide the actual NOI by your calculated CAP and that's your maximum allowable offer price. Offer not more than the lesser of the asking price or the calculated price, and you may want to start negotiations about 10% to 20% below that amount.
I suggest a DCR of not less than 1.5 to accommodate recessionary pressure on income and expenses. That will allow enough cash flow margin to handle downturns in NOI.

May 19, 2010
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Rob B.
Chandler, AZ

The comparison for a cap rate is always, what will the investors money with alternative uses of capital. Keep your money in the bank at one established interest rate; purchase bonds at another; buy stocks at the roll-of-the dice; invest in gold that has little commodity value; go to Las Vegas or your nearest Indian Nation; or, keep it under your mattress. There are other ways to use one’s money, but all have a risk/reward factor. The best advice at this time is to purchase a property that has current cash flow and a value added upside for the improvement of the property through good management. That the best comparable you can use. In other words know what you are doing or use the advice of a specialist that knows what he or she is doing.
Rob Baird, CA RE License #544165 (One of the oldest RE Licenses in CA)
951 515-5855

May 22, 2010
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Jim G.
Sacramento, CA

There are readily available comps -- including cap rates, price per unit or price per square foot in Sacramento and Stockton. Gross Rent Multiplier might be a great proxy for you. I would recommend that you contact a commercial and investment real estate broker who speicalizes in the property type and the neighborhoods that you are considering.
Also, I would suggest that you consider purchasing one of the commercialy available market reports from Loopnet for instance for a market area.
Frequently, in the apartment market , since operating expenses are variable and managment practices are different, buyers and their advisors will use Gross Rent Multiplier as a substitute for Cap Rate. Gross Rent Multiplier or GRM is a ratio of Gross Rents to Asking or Sales Price.
Good luck! There are plenty of reliable information sources out there from active professionals in the Sacramento and Stockton Markets.

May 31, 2010
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Solomon B.
Sacramento, CA

Go to:

Feb 24, 2012
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