Sweet Spot: The Ideal Cap Rate Range for Buying Multifamily Assets in Texas Today

Cap rates, or capitalization rates, are crucial in real estate, calculated as net operating income divided by sales price. Sellers prefer low cap rates for higher prices, while buyers favor high cap rates. These rates fluctuate based on market conditions, tenant occupancy, and interest rates. Recent discussions among multifamily investors highlighted competitive cap rates around 4.5% to 5.25%. Investors are cautious about negative leverage and seek solid rent growth to justify lower cap rates, especially in Texas markets facing oversupply but long-term growth potential.