Denver Cap Rates

17 Replies

Hey Friends!

I've got a 4-plex in Denver. Cap rate is 11%. Reversionary Cap rate is 14%. Why don't I raise rents? Cause I have good tenants and they don't bother me. I know a lot of people won't understand this, but it works for me.

That being said, I'm looking at expanding into more properties. I know I won't be getting 11%, but does anyone have an estimate of expected Cap rates within 2 miles of Downtown Denver?

Cap rate = Annual Net Operating Income / Purchase Price

Thanks!

Originally posted by @Steven Tawresey :

Hey Friends!

I've got a 4-plex in Denver. Cap rate is 11%.

That being said, I'm looking at expanding into more properties. I know I won't be getting 11%, 

Cap rate = Annual Net Operating Income / Purchase Price

Thanks!

 If the market cap rate on your current property is 11% why would you think you couldn't buy at the same cap rate?

He bought it during a cheap time, and now times are different. (just at a guess, but it's not an unreasonable one)  Market's been on the rise quite a lot here over the past few years.

I bought this property 7 years ago when the price was low and refinanced when rates were at the bottom. Rents are up, prices are up, inventory's low, vacancy's low.

I think a typical cap rate in and around Denver is 6-8%, assuming you aren't finding off market deals. No doubt rents are up just like prices. 

For those trying to buy now, 11% cap rates are unheard of. 6-8% is more typical in Denver. 

Originally posted by @Kelly Sennholz :

For those trying to buy now, 11% cap rates are unheard of. 6-8% is more typical in Denver. 

 So then the OP is incorrect claiming his property is at an 11% cap.  

Originally posted by @Bob Bowling:
Originally posted by @Kelly Sennholz:

For those trying to buy now, 11% cap rates are unheard of. 6-8% is more typical in Denver. 

 So then the OP is incorrect claiming his property is at an 11% cap.  

 7 years ago vs now.

He has a deal. He should cherish it. I have properties like that, too, but now.... unicorns. 

@Kelly Sennholz   Unicorns, I love it!

Properties I bought in 2010-2012  - Unicorns. 

Prices vs rents now - Miniature Horses.

It seems even finding mini horses in Denver is rare these days.

I think the confusion comes from my use of Purchase price vs. Current Value in the equation. Using my purchase price, I'm around 11%. Using an average value of 7% for Denver Cap rates, and manipulating the equation gives a property value much higher. 

In other words, if someone were to buy my property, I'd sell it to them at a price that nets them 7%. The Cap rate on my initial investment however is different.

Typically talking cap rates for properties that are 4 units and less isn't done too much. Comparable sales is the way 1-4 units are valued. Cap rates are for 5+ unit properties. The difference being the loans that are available for 1-4 unit properties. You get all those BP house hackers driving up the prices on the 1-4 unit properties.

At any rate, I wish you well with finding another property.

Originally posted by @Brian Kraft :
Originally posted by @Bob Bowling:
Originally posted by @Kelly Sennholz:

For those trying to buy now, 11% cap rates are unheard of. 6-8% is more typical in Denver. 

 So then the OP is incorrect claiming his property is at an 11% cap.  

 7 years ago vs now.

 Then that ship has sailed.  You can't invest in today's market based on 7 year old information.  The property is NOT at a 11% cap today.  

You disagree with the formula in the first post?

Originally posted by @Bob Bowling:
Originally posted by @Brian Kraft:
Originally posted by @Bob Bowling:
Originally posted by @Kelly Sennholz:

For those trying to buy now, 11% cap rates are unheard of. 6-8% is more typical in Denver. 

 So then the OP is incorrect claiming his property is at an 11% cap.  

 7 years ago vs now.

 Then that ship has sailed.  You can't invest in today's market based on 7 year old information.  The property is NOT at a 11% cap today.  

 The ship has sailed, but the OP is on the [email protected] an 11% cap rate. He's not looking to buy it, he already owns it.

Originally posted by @Brian Kraft :
Originally posted by @Bob Bowling:
Originally posted by @Brian Kraft:
Originally posted by @Bob Bowling:
Originally posted by @Kelly Sennholz:

For those trying to buy now, 11% cap rates are unheard of. 6-8% is more typical in Denver. 

 So then the OP is incorrect claiming his property is at an 11% cap.  

 7 years ago vs now.

 Then that ship has sailed.  You can't invest in today's market based on 7 year old information.  The property is NOT at a 11% cap today.  

 The ship has sailed, but the OP is on the [email protected] an 11% cap rate. He's not looking to buy it, he already owns it.

 Um, NO.  That 11% cap rate died the day similar properties sold at different market cap rates.  He ain't got 11% nothing, well except for the 7 year old memory.

Hey Steven.  Nice work on the 11%!  For current cap rates by market, check out this resource that tracks the top 50 markets in the US. Link here: http://apartmentpropertyvaluation.com/

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