Seller representation · Echo Park · 90026
How I price Echo Park income property
I price on cap rate for a cash purchaser and cash-on-cash return for a financed purchaser, benchmarked to the 10-year Treasury. I start with the building’s actual income and costs.
By David Levine Bramante · CA DRE #01511588 · Last updated · Published
Net operating income is the starting point.
I subtract operating expenses from property income before debt service and income taxes. I distinguish current collections from projected rents and identify adjustments such as repairs, vacancy, taxes, insurance, and management. I label every projection so a purchaser can challenge the assumptions.
Cap rate connects income and price for a cash purchaser.
Cap rate equals annual net operating income divided by purchase price. Rearranged, price equals net operating income divided by the required cap rate. A small change in assumed income or required return can materially change the implied price.
Cash-on-cash return tests a financed purchase.
I divide annual cash flow after debt service by total cash invested. I include the down payment, closing costs, reserves, and planned work in the cash requirement. This measure is before income taxes and does not include appreciation or principal paydown. Loan terms must come from an actual financing quote.
The 10-year Treasury is a benchmark, not a formula for a cap rate.
I compare property returns with a dated Treasury yield while considering management work, condition, liquidity, tenancy, and financing risk. I do not publish an unsupported fixed spread or current market cap rate. TODO: add the dated Treasury observation and source when preparing an actual valuation.
GRM and unit-price ratios are not my pricing basis.
Gross rent multiplier leaves out operating costs. Price per unit and price per square foot can hide differences in leases, condition, and net income. I price the return supported by the records instead of applying those ratios as a substitute for underwriting.
Editorial policy, source standards, and corrections
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Echo Park multifamily seller resources · Documented sales · About David Levine Bramante