Colonia, NJ · Member since 2015 · 83 posts · 17 votes
Hey guys,
I've been doing the numbers for a few properties, and I'm wondering what type of CAP rates you usually tend to want with a decently maintained clean house with hardly any issues.
Some of the homes that I've recently looked at have decent CAP rates but the amount of work that needs to be put into them makes them undesirable (Water damage, caving in floors, Leaks and Roofs going bad).
What is a CAP rate you usually end up getting with your properties and or look for in any properties?
Investor · Stevens Point, WI · Member since 2017 · 75 posts · 61 votes
8y
In all honestly, cap rate isn't that important to me. My strategy is to buy, improve, and hold; typically.
I do calculate the cap rate when considering a purchase, because it's part of going through the motions, but I don't pay much attention to it when deciding whether to do a deal or not.
For me, it's cash on cash return that's important, how fast will I get my down payment back? If a cash on cash return doesn't look good, it's always a good idea to consider the internal rate of return as well; sometimes cash on cash return calculations don't look good, despite the investment being solid.
That said, if your strategy is reliant upon cap rates, and to answer your question; I took a look at the buildings I bought, and what the cap rates were for me when I purchased. The duplex I got was at: 7.3% (2016), the three plex was at: 11.2% (2016), and the 12 unit was at: 14.9% (2013).
Rental Property Investor · Gulf Breeze, FL · Member since 2014 · 1k+ posts · 733 votes
8y
Agree with @Johnny Hastings, @Cody Jensen. Also want to add that CAP Rates are typically only used for MFRs>5. How do you use it when calculating SFRs?