Realistic cap rate for multi family

5 Replies

Simple question. Is it reasonable (or realistic) to want a 10 cap when purchasing a multi family building? Why can't I find those anymore?

It's very much dependent on your market. Generally, the east and west coasts (where housing is pricey), expect a lower cap rate. In Seattle, 5-6 is as good as it gets. For a 10 cap, you'll need to look toward the middle of the country. Not saying it's impossible in NJ. A seller would have to be highly motivated. Or it's a not so great property.

They are out there. You need to network more and as Ruth mentioned you will have to look in the middle of the country. Even then it might be difficult and you would be looking at distressed property for 10+cap. 9 cap is more reasonable and achievable

It is difficult to find 10 caps because the price growth of buildings has generally outpaced rental price growth. That being said, cap rate does not give you the full picture of your return based on different financing situations. It is simply a snapshot of return at the current point in time based on a cash purchase.

Overall returns higher than the cap rate are more than possible.

A friend asked me about this last night.  As of now, the Seattle area is roughly:

4-5% for A areas

5-7% for B areas

7-8% for C areas

Of course, there will be outliers as well.

very good analogy daniel, i tend to agree with everything that you just stated, keep posting but most of all keep sharing 

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