Updated about 10 years ago on . Most recent reply
What are the pros and cons regarding high cap rates?
I have recently read a post that mentioned high cap rates can be risky?
I am new to investing and up until the other day, I believed that the higher the cap, the better the income. What are the pros and cons of this? I am leaning towards obtaining some MFRs and I want to be sure Im doing my research right.
Most Popular Reply
Whenever you see a high CAP you must ask yourself - why? There's always a reason, and most of the time it's not good :)
When you read Pro Forma, which presents you with a chain of logical information resulting in a CAP rate, it's important to remember that the rate is only as good as the information, and the information is nothing more than someone's spin...
Case and point - I put in an offer today on 100+ units. The asking CAP was at 9.5 - having done the research and using real numbers, it bacame clear that the true rate had I paid the asking price would have been 3.3%...
My offer reflected this lol