Apartment Loan Store

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CAP Rates For Apartment/Multifamily Properties in Miami, Florida

Multifamily Apartment Cap Rates

Cap Rates for Multifamily Apartment properties are relatively flat for 2019 in this market. Averaging 4.60 for newer Luxury Metro properties, 4.87 for A Class, 5.24 for B Class, 6.02 for C Class and 6.40 for Value Added Acquisitions.  With the economy adding more jobs and moderate wage increases rents are stable and vacancies are less than 5.00%. The continual increase in single-family home prices throughout 2019 has strengthened the demand for rental units. The volatility of the Stock Market has pushed more investors into US Treasury Bonds and Income Property Investments.  The increase in residential interest rates during the first quarter of 2019 initially increased the demand for rental units.  In June of 2019 interest rates came down significantly, but the demand for multifamily rental units is still increasing.   

 

Multifamily Apartment Cap Rates
Rates as of: 08/21/2019
Description Cap Rate
New Luxury Metro 4.60
A Class 4.87
B Class 5.24
C Class 6.02
Value Added Acquisition 6.40

 

DON’T FALL INTO THE CAP RATE TRAP

“Are you kidding me?” my client asked.  “You’re telling me that the property taxes are going up by $19,500 when the county reassess the property I’m buying based on the purchase price after I own it?”

“Yes”, I answered.  “In California they do that.” 

“Well then”, he said, “ that means I’m buying the property for a 4.70 cap instead of the 6 cap the listing agent said it was. That means I’m getting ripped off and the listing agent lied to me. Why would he put the seller’s lower property taxes in the list of expenses and calculate a 6 cap? This is the only property I’ve identified in my 1031 exchange.  What am I going to do?”     READ MORE

 

With a stronger economy and the increase in jobs and moderate increase in wages, rents have remained strong on multifamily units but are trending towards being flat in 2018.The increase throughout 2017 in single family home prices have kept more working class families renting.On the flip side there were 1.2 million new homes created out of which 854 bought and 365,000 rented.The millennial’s are favoring renting A and B quality apartment units rather than homeownership. More Seniors are choosing to rent as well.These factors show that demand for rental units will continue to be steady.

Realpage has reported that absorption of existing rental units picked up in the 2nd and 3rd quarters of 2017.Currently there are many multifamily units being added to the market awaiting completion.This is expected to moderately increase vacancy rates. Multifamily permits have slowed in the last 2 quarters of 2017. With the increase of new apartment units the supply is slightly expected to be higher than demand resulting in a slight increase in market vacancy.

About the Miami, Florida Real-Estate Market

The Miami residential real estate market is doing well according to a real estate organization. For single family, condos, as well as expensive houses of minimum of one million dollars, there was an increase in sales January 2018. There was an increase of 5.1% in Miami Dade. This was 1,731, January 2017 to 1,820, January 2018 - $89 million increase in sales January 2018 compared to 2017.

For investors, this seems like good news. However, it is not for those who do not own a house. Prices have increased each month for 74 months. Home ownership is out of the range of possibility because the single family residence is now an average cost of $330,000 – an increase of $20,000 in the one year period.

There is a silver lining in this – 14 months of apartment inventory. This is a sign that the real estate market for buyers is favorable.

When it comes to condos, the largest hurdle to overcome is being able to finance one. There are 9,307 buildings that house condos in Broward and Miami-Dade. There were just 12 approved for getting a loan from the FHA. This is not good. A lot more needs to be done to help the Miami resident be able to afford the cost of entering the home ownership market.

 

Now on to Miami commercial property.

There is a possible large project involving renovation of historic downtown Macy’s department store, and it involves the new construction of two side by side 50 to 55 story buildings.

A historic landmark of Miami, Macy’s will close this current year as part of a cut back plan that is national in scope. The plan involves renovation of the historic Macy’s building, as well as new construction of two buildings, a building on each side of Macys.

Retail stores will occupy the first few stories of all three buildings. The rest of the floors will contain a mix of a hotel, offices, and residences.

_____________________
 

 

U.S. National-Level CAP Rates and Expected Rates of Return by Property Type, Sector, Class and/or Segment

   

Stabilized Property Acquisitions

Value-Add Property Acquisitions

   
CAP Rate
 
AD Over 10-Yr Treasury
Expected Return on Cost 
 
AD Over 10-Yr  Treasury
Property Type
​Sector
Class/
Segment
H1 2017
(%)
H2 2017
(%)
Change
(bps)
H1 2017 (%)
EOP 1.49
H2 2017 (%)
EOP 2.45
H1 2017
(%)
H2 2017
(%)
Change
(bps)
H1 2017(%)
EOP 1.49
H@ 2017 (%)
EOP 2.45
Office
CBD
ALL 6.61 6.63 2 512 418 8.22 8.24 2 673 579
AA 5.19 5.24 5 370 279 - - - - -
A 5.95 5.99 4 446 354 7.12 7.10 -2 563 465
B 6.85 6.84 -1 536 439 8.02 8.03 2 653 558
C 8.61 8.64 3 712 619 9.83 9.8 6 834 744
Office
Suburban
ALL 7.64 7.76 11 615 531 9.21 9.33 11 772 688
AA 6.20 6.31 11 471 386 - - - - -
A 6.96 7.07 11 547 462 8.06 8.18 12 657 573
B 7.97 8.13 16 648 568 9.20 9.27 7 771 682
C 9.30 9.46 16 781 701 10.45 10.60 15 896 815
 
Industrial
ALL
ALL 6.72 6,73 1 523 428 7.71 7.74 3 622 573
A 5.48 5.54 5 399 309 6.34 6.41 8 485 396
B 6.59 6.52 -7 510 407 7.53 7.53 0 604 508
C 8.13 8.16 4 644 571 9.31 9.33 3 782 688
 
Retail 
Neighborhood
Community
ALL 6.94 7.12 18 545 467 7.92 8.14 22 643 569
A 5.62 5.66 4 413 321 6.59 6.85 26 510 440
B 6.83 7.03 20 534 458 7.81 8.00 19 632 555
C 8.39 8.68 29 690 623 9.36 9.58 22 787 713
Retail
Power
ALL 7.36 7.54 18 587 509 8.25 8.47 22 676 602
A 6.11 6.16 5 462 371 7.21 7.31 10 572 486
B 7.30 7.47 16 581 502 8.06 8.40 34 657 595
C 8.70 9.03 33 721 658 9.52 9.74 22 803 729
Retail
High Street
                     
A 4.23 4.37 13 274 192 - - - - -
                     
 
Multifamily
Infill
ALL 5.26 5.32 6 377 287 5.95 6.03 8 446 358
A 4.60 4.67 8 311 222 5.34 5.41 7 385 296
B 5.15 5.20 5 366 275 5.78 5.87 9 429 342
C 6.06 6.12 6 457 367 6.75 6.81 7 526 436
Multifamily
Suburban
ALL 5.67 5.74 7 418 329 6.33 6.45 11 484 400
A 5.01 5.10 10 352 265 5.62 5.71 9 413 326
B 5.53 5.61 8 404 316 6.16 6.26 10 467 381
C 6.48 6.50 2 499 405 7.22 7.37 15 573 492
 
Hotels
CBD
ALL 7.85 7.91 6 636 546 - - - - -
LUXURY 6.83 6.92 8 534 447 - - - - -
FULL SERVICE 7.55 7.62 8 606 517 - - - - -
SELECT SERVICE 7.94 8.01 8 645 556 - - - - -
ECONOMY 9.10 9.11 1 761 666 - - - - -
Hotels
Suburban
ALL 8.39 8.44 5 690 599 - - - - -
LUXURY 7.42 7.50 7 593 505 - - - - -
FULL SERVICE 8.07 8.14 7 658 569 - - - - -
SELECT SERVICE 8.46 8.53 7 697 608 - - - - -
ECONOMY 9.59 9.58 -1 810 713 - - - - -

 

 

 

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