Average U.S. multifamily cap rate Q4-2023: 5.2 % (CBRE U.S. Cap Rate Survey, 2024).
Typical operating expenses equal 30–45 % of gross income (IRS Pub. 527, 2023).
Industrial properties traded at a median 6.1 % cap in 2023 (Moody’s Analytics CRE, 2024).
Cap rates fall roughly 20 bps for every 100 bps drop in Treasury yields (Marcus & Millichap, 2023).
FHA underwriting caps expense vacancy at 2–10 % depending on asset class (HUD MAP Guide, 2022).
FAQ
What does a high cap rate tell you?
A high cap rate signals greater expected return but also higher perceived risk, especially in secondary markets (NAR Commercial Outlook, 2023).
How often should you recalculate the cap rate?
Update annually or whenever rent, expenses, or valuation shifts by 5 % or more to keep comparisons meaningful (IRS Pub. 527, 2023).
Does financing change the cap rate?
No. Cap rate ignores debt; it reflects the property’s unleveraged income stream (CCIM Institute, 2023).
Can the cap rate be used to estimate value?
Yes – invert the formula: Property Value = NOI / Cap Rate. Lenders rely on this direct-capitalization method in appraisals (Appraisal Institute, 2022).
What is a “going-in” vs. “exit” cap rate?
Going-in uses today’s NOI; exit uses projected NOI at sale. Investors compare both to gauge hold-period growth (PwC Emerging Trends, 2024).
Which sectors show the lowest cap rates?
Prime CBD office and core coastal multifamily averaged below 4 % in 2023 due to strong demand and limited supply (CBRE, 2024).
How do interest rates affect cap rates?
“Cap rates track interest-rate movements but with a lag,” notes CBRE’s survey (CBRE, 2024). Rising yields push cap rates up as investors seek spread over risk-free returns.
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