Contractor · Indianola, WA · Member since 2008 · 72 posts · 6 votes
What would you want as a minimum cap rate on a new apartment complex in order for it to pencil out as viable or at what point would you pull the plug on a potential project? Thanks!
Investor · Cincinnati, OH · Member since 2010 · 1k+ posts · 928 votes
13y
This question seems a bit too general, numerous variables:
* The grade of the neighborhood
* The grade of the property
* The ability to obtain optimal financing on the property (i.e. long-term low fixed-rate from Fannie, for example)
* Area supply/demand of renters - current and projected
* Area supply/demand of investors
* The size of the complex - at a certain point the large institutional money is a buyer and this drives down the cap due to their very low COF
So range would be 6% - 12%. For me personally, on new construction in a nice area I'd want to see 8% or better with ability to secure very attractive financing (in the 4's).