True Cap Rates (return on cash) expressed as percentage in Whatcom County run 5-7%.
An absence of Inventory leads sellers to think they can push the boundaries of values. Which is fine as long the information is accurate. However, they forget they are dealing with like minded professional investors who will not chase a poor return. The investment market is no different than the market as whole, overpricing means poor returns, extended time on market and a stale listing.
- A recent local example and how a pro looks at it:
- Asking Price $2M over $400 per foot
- Assessed Value - $669,000
- Total Square feet 4700
- Bought in 2015 for $825K
- Expenses as shown 21% on an 80 year old building. Should be 35%
- Rents range as high as $3 foot for 350 square feet. No idea how they got those rents, but not credible. Certainly not sustainable.
- Garage NO
- MLS price claims 4.9 CAP
- Actual CAP rate based on rents 4.2 CAP
- CAP rate based on Market Rents at $1.75 per foot = 3.25
- Recommended purchase price - $1.4M at 5% return due to improvements and nice location.
Nope… not waterfront or water view, new construction... just overpriced.
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