At $196/SF, Why Would You Ever Build an ED1 Project?
Existing apartments at $196/SF. A 6.11% cap on Day One. A path to much stronger cash flow over time. Convince me why building ED1 is a good investment.
At a glance
closed Dec 17, 2025
$825K bid-ask delta
4×1BD · 15×2BD · 3×3BD
per door
26,883 gross SF
at-close, confirmed
LARSO-covered
0.40 acres · LAR3
JP Morgan Chase · Conventional
long sit, heavy cut
What matters
- $196/SF Is the Number That Stopped Me.Let's put that into perspective. $196/SF to buy. $150-250/SF for the land alone. $300-400+/SF to build comparable apartments today before financing, entitlement costs, and years of carrying costs. Whether you agree with my underwriting or not, one thing is hard to ignore: Buying this building is MUCH cheaper than replacing it.
- At $196/SF, Why Would You Ever buy or Build an ED1? If you can buy apartment buildings for $196/SF, why would you ever Buy or Build an ED1 Project? Developers take entitlement risk. Construction risk. Lease-up risk. Financing risk. This buyer skipped all of that and bought an existing income building and doesn't need to worry about Parking for tenants.
- The Biggest Risk Isn't the Building. It's Costa-Hawkins. I think the biggest risk in this investment has nothing to do with the property itself. It's Costa-Hawkins. If Costa-Hawkins is repealed, every investor has to worry about owning apartments with below-market rents that may never fully reset to market.
- Someone With $186 Million of Acquisition Experience Saw Something Everyone Else Didn't. They can buy an existing apartment building for $196 per square foot, with parking, immediate cash flow, and a 6.11% going-in cap rate with a path to a 9% cap rate, So the question is: Why take years of entitlement, construction, financing, and lease-up risk when the market is offering opportunities like this?
The Setup
This 22-unit apartment building at 4573 Willis Ave. sold for $5.275 million, or just $196 per square foot.
The buyer, B.A.G. Investments, has acquired more than $186 million of real estate over the past five years. They're buying it because they believe today's prices gives them a business plan that can get them 11-17% IRR.
What an Operator Sees
I see $196 per square foot, a below replacement cost, a 6.11% going-in cap rate, positive leverage, below-market rents with upside, tax depreciation, and a path to a 9%+ yield on cost.
If interest rates normalize, a future refinance could return a meaningful portion of the original equity while the property's cash flow continues paying down the debt.
I see a long-term plan with the potential to generate 11–17% leveraged IRRs, build equity through debt amortization, and eventually become a debt-free cash-flow machine.
That's why I like this deal.
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Property and transaction data: CoStar Research.
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Appeared in the Sept. 6, 2026 edition of The Tape.