What cap rate, etc should I aim for?

Question

Hello, I'm considering buying a duplex in Ft Wayne.

I'm wondering what cap rate, COC return, IRR, etc I should try to get.

Thanks.

Greg Scott · Answer

Cap Rate is a term only relevant to commercial properties.  You can ignore it on a duplex.  It is meaningless.

IRR is a term used by people selling an investment to others. You can try to calculate that, but it isn't important unless your guesses are correct.

That leaves you with CoC.  Figure out what is a meaningful return to you.

Marcos De la Cruz · Answer

Greg,

Thanks, that helps.

Greg Kasmer · Answer

Marcos - I agree with Greg's comments ("Gregs" think alike :) that cap rate is not relevant for a duplex. Everyone's investment criteria varies and sometimes it varies by location and type of property. For a residential (1-4 unit) deal, a "buy and hold" duplex for me (without driving value via renovations/BRRRR'ing) would be CoC between 8-12% and/or about $250 per door. For a duplex that you're renovating and potentially BRRRR'ing I would look to target to get 80%+ of my cash back on the refinance and then cash flow a bit less - maybe $100-$150 per door.  Once again, if you ask 10 people for their investing criteria you'll get 10 answers, but over time you'll develop your own criteria based on what's a good deal for you in your particular market. Good Luck!