Cap Rates and Non Disclosure States Explained

some Equity people have asked hey what's this cap rate like compared to the other cap rates and Texas is a non-disclosure State um so Rob would love for you to explain what that means specifically to this but Texas is a non-disclosure State and a lot of people ask hey how's this cap rate compared to the other sales and the answer is well it kind of depends so do you want to kind of maybe break that down as well yeah well Texas like you said is a non-disclosure state which is simply means that sale prices are not public data so it can be arguably more challenging to get sale comp data in Texas but at the end of the day Brokers keep track of all that stuff obviously that's their business that's their job so we're able to get sales comp data from the Brokers that we work with and I think that's Fairly reliable however regardless of whether a state is a uh disclosure or non-disclosure State when it comes to sale price it's very very difficult to get true cap rate data when it comes to sales comp uh because because like we just talked about we just we we literally just wrote a whole book on the differences and cap rates and how everyone underwrites them differently so if you came to me and you said hey this is a x cap rate it really it could mean something to me or it could mean almost nothing right it just kind of depends on the source like if if our good friend JC Clemens tells me what the ca rate is I know him and I speak the same language and vice versa so when he calls me and asks for the cap rate it means something to him but unless you know somebody in in the way that they underwrite it doesn't really mean much so if the Brokers provide us a spreadsheet and they say all right here's all the sales comps and it was X price per unit and it's a 5.3 cap it's like I I cannot do any I I certainly can't take that to the bank and I really can't do almost anything with it so the best cap rate data that you have is your own because that you underwrite your own way and it just means something to us and it's not really going to mean nearly as much to somebody else so that's why it's really important as we always preach to be focused on a specific Market where you can have a chance to underwrite a lot of the same deals or a lot of the deals in the same area so that you can actually know and understand the market and just really quickly understand oh wow this is a 6.8 yield on cost or it's a 7.4% yield on cost you know that that looks really good

Channel: Rob Beardsley – Lone Star Capital

Views: 72

Keywords: rob beardsley, multifamily, real estate, lone star capital, underwriting

Id: kQ7tHiVP3GE

Length: 2min 28sec (148 seconds)

Published: Fri May 24 2024