Lender · Fort Lauderdale, FL · Member since 2017 · 83 posts · 33 votes
I just calculated the cap rate for a property I'm going to develop within the next year: 20%
Here are the numbers:
$40,000 to build
$30,000 for the land
2 Units
Annual Gross Income: $24,000
NOI: $14,000 (conservative estimate as expenses will be low, as property will be brand new)
DCR: NA (all cash, no loan)
Cash on Cash ROI: 200%+
These numbers seem unrealistically fantastic. Am I to be worried that I'm miscalculating something somewhere? The property is also beachfront, so insane appreciation is to be expected, but is not a factor in the calculations.
If anyone is astronomically confused, the property is in Ecuador, South America.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
9y
$40 k to build 2 units seems unrealistically cheap, even for just the slab up....let alone site work, permitting, impact fees, plans, engineering, etc.
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
9y
I'm going to agree with Wayne above and say that there is no way you can build a duplex to code for $40K anywhere in the country -- unless you do it with your own two hands. But, if you do it with your own two hands, then you should factor in the value of your time, which in itself will change the numbers substantially.
Lender · Fort Lauderdale, FL · Member since 2017 · 83 posts · 33 votes
9y
I appreciate the feedback, but please read the entire thing. The property will not be built in the United States, so your feedback of what you expect in the market is unwarranted.
Not only would be property be extremely high in quality, it would be a few hundred yards from the ocean. This price had been carefully calculated, including all materials, contractor, architectural plans, etc.
Ecuador is a completely different market and many things are incredibly inexpensive. It also uses the US dollar.
Your striking disbelief doesn't really answer my question, if anything it just shows me I've been lucky enough to find a market better than anything anyone is investing in.
Before you look into investing in Ecuador, just know that I have a citizenship I gained after living there for 3 years and have built all the necessary contacts to complete this project and gathered all the required permits after years of work.
Now, this being said, the numbers work, am I wrong? I'm not miscalculating anything, am I?