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$150 Million +
Apartment Transactions
12+ Years
San Diego Experience
2–50
Units — Exclusively Apartments
How Buyers Are Underwriting Deals in Today's Market
Today's buyers are not using last year's comps. They are pricing based on:
Current Debt Costs — Interest rates are the primary driver of pricing.
DSCR (Debt Service Coverage Ratio) — Lenders are requiring higher yield cushions.
Yield Requirements — Most active buyers are currently underwriting to a 5.5%–6.0% yield requirement.
Strategic Take: This is why many escrows fail today — not because of the property, but because the financing terms change during due diligence.
The San Diego Expense Trap
This is where most valuations break down.
Why Expense Accuracy Matters
Most brokers under-budget for utilities, maintenance, and real-world management. In the San Diego market, a 1% error in your expense ratio can swing your valuation by $50,000+ on a mid-sized property. Buyers identify and correct for these errors immediately during escrow.
Working with a specialized San Diego apartment broker means underwriting is built around real operating expenses — not optimistic assumptions that fall apart during due diligence.
Why One Deal Does Not Define a Submarket
Some properties trade at very low cap rates because:
Vacancy suppresses current NOI
Buyers are pricing future rent upside
Others trade at higher cap rates because:
Deferred maintenance increases risk
Management complexity requires a premium
Cap rates vary deal-by-deal — not just by neighborhood.
Real Example
Why Cap Rates Can Be Misleading
2.1%
Actual Cap Rate
9.0%+
Pro Forma Cap Rate
High
Vacancy at Close
A recent North Park sale showed a 2.1% actual cap rate — but a 9.0%+ pro forma cap rate due to high vacancy at close. The buyer wasn't pricing the deal based on current income — they were pricing the stabilized upside. View our recent sales to see how these deals actually close.
This is why looking at cap rate alone can be misleading.
When Buyers Aren't Buying Yield — They're Buying Future Density
We price for Intrinsic Value — the yield hidden in the land.
If a property supports:
ADUs (Accessory Dwelling Units)
Additional density under current zoning
Redevelopment potential
The cap rate often compresses because buyers are paying for future income — not just current return.
This is one of the most misunderstood dynamics in San Diego multifamily. If you own a property with development potential, a standard cap rate analysis will undervalue your asset. See how we approach this in our apartment
Get Your Real Cap Rate
A confidential, data-backed cap rate analysis based on current debt costs, buyer demand, and your property's real operating performance.