The price / rent multiple is not analogous to a P/E ratio. Rather, it is similar to an Enterprise / revenue multiple. The distinction is important because, as a

The price / rent multiple is not analogous to a P/E ratio. Rather, it is similar to an Enterprise / revenue multiple. The distinction is important because, as an investor in apartment properties, I can tell you that the Net operating income margin (roughly analogous to an EBITDA margin for C-Corps is much, much higher in San Francisco than in other places. For example, the NOI margin in San Francisco is usually about 75%. In Merced California, it is about 30%. Once you subtract Capital Expenditures, the 30% is cut almost in half. Basically what I’m saying is that the net cash flow, after Capital Expenditures, in many “C” and below locations is basically zero. Thus, the price has to go very low to entice investors to buy there. This is not irrational behavior.