Cap Rates?
“What’s the difference between a cap rate and the gross rent multiplier?”
***ANSWER:
Cap rate is the opposite of a price/earnings ratio, used with stocks. Here are some random cap rates and GRMs in San Diego:
Cap\GRM Area
4\15 Pacific Beach
5\13 North Park
5.3\12 El Cajon
As you can see, as cap rates go up, gross rent multiplier goes down.
Generally speaking…
When you buy, you want a high cap and low GRM.
When you sell, you want a low cap and high GRM.
Hope that makes sense!
June 21st, 2006 at 8:56 am
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