Multifamily Mortgage Bankers and Brokers since 1997

Get Your Free Multifamily Loan Quote

CAP Rates For Apartment/Multifamily Properties in Miami, Florida

Multifamily Apartment Cap Rates
Rates as of: 05/25/2024
Description Cap Rate
Luxury Metro A Class 5.10
Luxury Metro B Class 5.15
Luxury Metro C Class 5.60
Suburban A Class 5.25
Suburban B Class 5.35
Suburban C Class 5.75
Value Added Acquisition 6.65
Share

Multifamily Apartment Cap Rates

Video about HUD Multifamily Loans

October 2023 Multifamily Cap Rate Report

By Terry Painter/Mortgage Banker, Author of The Encyclopedia of Commercial Real Estate Advice, member of The Forbes Business Council

Multifamily Cap Rates are Expanding

The good news for apartment building investors is that multifamily cap rates have gone up slowly from the third quarter of 2022 to the third quarter of 2023 expanding 44 bps, from 4.63% to 5.07% according to CBRE. This has effectively lowered the average sales price on a $1 million property over the year by 8.8% or $88,000. As multifamily investors are welcoming lower sales prices, they are being hammered by rising interest rates that lower returns on their investment to unacceptable levels. Most of my borrowers are faced with having to negotiate a lower sales price or canceling the purchase after I size their loan and tell them they have to put 50% down. A year ago, this would have been 44%. At the beginning of 2022 our average multifamily borrower had to put about 35% down.

Multifamily Sales Volume and Loan Volume are Down

Multifamily sales volume and loan volume are at historical low levels. Cap rates need to rise a good deal more and interest rates need to come down before the commercial real estate market can recover. Rising interest rates that peaked at just under 8.00% at the end of October have collided with high multifamily prices further slowing down both purchases and loan originations. According to MSCI Real Capital Analytics, sales volume reached $89.6 billion through the first three quarters of 2023, which was considerably down from the $251.9 billion recorded during the same period of 2022.   According to the Mortgage Bankers Association, multifamily loan originations were down by 49% from the previous year at the end of the third quarter 2023. As a commercial mortgage banker, our multifamily loan volume is down by over 70% this year. 

 

Demand for Apartment Rentals is High

Multifamily cap rate expansion is being slowed by the high demand for multifamily rentals. High mortgage rates have pushed many would be home buyers into the rental market. According to Redfin, a home buyer now has to earn $114,627 annually to afford the medium priced home at $420,000. This puts their monthly payments 27% higher than rent on the average apartment. According to Cushman and Wakefield, demand for apartments for the third quarter 2023 was 89,280 units which was an 11% increase over the prior quarter but six times above last year’s third quarter increase of 13,000 units. This is also a result of economic strength in jobs and low unemployment.

Rent Growth is Down and Vacancy and Concessions are Up

High vacancy and slow rent growth are two metrics that historically have increased cap rates. This trend should create more cap rate expansion over the next year. According to Cushman and Wakefield, vacancy rates nationally have gone up over the past year from 6.5% to 7.8%. According to Fannie Mae, Annual rent growth through October of 2023 has decreased to 2.6% due to over 400,000 new units flooding the market out of the 730,000 new units expected to come on line in 2023. This is very low rental growth if you compare it with combined rental increase of close to 20% for 2021 and 2022. Most of the new supply of units were in high amenity A class complexes. This has effectively kept A class rental rates flat with high concessions. Rental concessions over all classes increased from 5.2% to 9.00% from a year ago. The average rental concession is one month free on a 12-month lease.

Should you Wait for Cap Rates to Go Higher to Purchase?

In my opinion, although cap rates have gone up, they are still unrealistically low when combined with today’s high mortgage rates, making investing risky. Ideally, commercial property values should increase based on rental growth, and not because low interest rates which bottomed out at 2.96% in December of 2021 made it possible. Sound economics just do not support today’s cap rates based on what investors need to earn. The average cash on cash return with 50% down is hovering around 4.20% after loan payments. Many of  my clients have told me they can earn 5.25% investing in CDs. Why should they buy rental property today with those numbers? And sure, many sellers and their real estate brokers will try to sell you in the operating memorandum that rents are under market. But are they with rental increases calming down? My advice is to wait until sometime in 2024 with the hope that interest rates will come down a lot along with sales prices. Hope that this additional time is not friendly to sellers who have to sell.  Over the past 26 years doing this job, I have made many loans on properties that came up for sale at lower prices due to loan maturity, economic hardship, divorce or death. 

                                                         

Sources

CBRE: https://www.cbre.com/insights/briefs/higher-rates-push-up-prime-multifamily-cap-rates-in-q3

Fannie Mae: https://www.fanniemae.com/media/49331/display

MBA:  https://www.mba.org/news-and-research/newsroom/news/2023/11/07/commercial-multifamily-borrowing-down-49-in-third-quarter-2023

Cushman and Wakefiled: https://cw-gbl-gws-prod.azureedge.net/-/media/cw/marketbeat-pdfs/2023/q3/us-reports/multifamily/us_multifamily_marketbeat_q3-2023.pdf?rev=951e0cd95c77403cbc6c67609f5e17b8

 

MSCI: https://www.msci.com/research-and-insights

Redfin: https://investors.redfin.com/news-events/press-releases/detail/987/redfin-reports-that-homebuyers-must-earn-115000-to-afford#:~:text=Press%20releases-,Redfin%20Reports%20That%20Homebuyers%20Must%20Earn%20%24115%2C000%20to%20Afford%20the,the%20Typical%20American%20Household%20Earns

 

 

 

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

About the Miami, Florida Real Estate Market in 2024

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 - - - - -

 

 

 

Other Cities in Florida served by Apartment Loan Store

  • Jacksonville 
  • Miami 
  • Tampa 
  • St. Petersburg 
  • Orlando 
  • Hialeah 
  • Tallahassee 
  • Fort Lauderdale 
  • Port St. Lucie 
  • Pembroke Pines 
  • Cape Coral 
  • Hollywood 
  • Gainesville 
  • Miramar 
  • Coral Springs 
  • Clearwater 
  • Miami Gardens 
  • Brandon 
  • Palm Bay 
  • West Palm Beach 
  • Pompano Beach 
  • Spring Hill 
  • Lakeland 
  • Davie 
  • Miami Beach 
  • Lehigh Acres 
  • Deltona 
  • Plantation 
  • Sunrise 
  • Boca Raton 
  • Town 'n' Country 
  • Alafaya 
  • Largo 
  • Melbourne 
  • Kendall 
  • Palm Coast 
  • Deerfield Beach 
  • Riverview 
  • Boynton Beach 
  • Lauderhill 
  • Weston 
  • Fort Myers 
  • Daytona Beach 
  • Delray Beach 
  • Homestead 
  • Tamarac 
  • Pine Hills 
  • Fountainebleau 
  • Kissimmee 
  • North Miami 
  • Palm Harbor 
  • North Port 
  • Wellington 
  • Ocala 
  • Kendale Lakes 
  • Port Orange 
  • Tamiami 
  • Jupiter 
  • Port Charlotte 
  • Sanford 
  • Margate 
  • Poinciana 
  • Coconut Creek 
  • Pensacola 
  • Sarasota 
  • The Villages 
  • The Hammocks 
  • Bradenton 
  • Pinellas Park 
  • Palm Beach Gardens 
  • Country Club 
  • Coral Gables 
  • Doral 
  • Wesley Chapel 
  • Bonita Springs 
  • Titusville 
  • Fort Pierce 
  • Apopka 
  • North Miami Beach 
  • Altamonte Springs 
  • Oakland Park 
  • University 
  • North Lauderdale 
  • Cutler Bay 
  • North Fort Myers 
  • The Acreage 
  • Ormond Beach 
  • Greenacres 
  • Hallandale Beach 
  • Panama City 
  • Kendall West 
  • Aventura 
  • South Miami Heights 
  • Ocoee 
  • Valrico 
  • Dunedin 
  • Egypt Lake-Leto 
  • St. Cloud 
  • Lake Worth 
  • Merritt Island 
  • Plant City 
  • West Little River 
  • Winter Garden 
  • Royal Palm Beach 
  • Winter Haven 
  • Carrollwood 
  • Oviedo 
  • Winter Springs 
  • Golden Glades 
  • Lauderdale Lakes 
  • Riviera Beach 
  • Land O' Lakes 
  • Richmond West 
  • Navarre 
  • University 
  • East Lake 
  • Lakeside 
  • Westchester 
  • Dania Beach 
  • Fruit Cove 
  • Miami Lakes 
  • Ferry Pass 
  • Clermont 
  • Cooper City 
  • Lake Magdalene 
  • Winter Park 
  • Fleming Island 
  • DeLand 
  • University Park 
  • Casselberry 
  • Four Corners 
  • Buenaventura Lakes 
  • Meadow Woods 
  • Rockledge 
  • Key West 
  • Temple Terrace 
  • Coral Terrace 
  • Citrus Park 
  • Immokalee 
  • Keystone 
  • Parkland 
  • Golden Gate 
  • Tarpon Springs 
  • Bayonet Point 
  • Palmetto Bay 
  • Bellview 
  • Wright 
  • Palm City 
  • Vero Beach South 
  • The Crossings 
CLOSING 97% OF OUR MULTIFAMILY LOANS AS PROPOSED 

Getting the right loan and the lowest rate requires wisdom and finesse. If you’re ready to partner with a team of professionals who’ve built a foundation on straight talk and true strategy, we are the loan store for you.

 

(503) 376-7303     Get a Quote

26+ YEARS OF OVER-DELIVERING VALUE.

HUD Loans are one of the best options with the current level of interest rates. For a complete guide to HUD Multifamily Loans please go here:

HUD Multifamily Loans - The Complete Guide