Cap rates for small multi falmily buildings

[Ned Carey]

I am putting together a package to present to private lenders for a 5 unit building. I am curious what cap rates are nationally for small multi family C class buildings.

I am using a 12% cap rate which I figure is very conservative for Baltimore but I also wanted to compare to a national number. Thanks - Ned

[Ben Leybovich]

@Kyle Kelley - a banker would tell you that a good quality asset around here should be underwritten conservatively at a 8.5% - 9 cap.  You can buy pigs at 20% cap all day long - why would you?

I'll say a few more things:

1. Small multifamily should not be underwritten strictly to the cap rate.

2. The idea is to buy something that is viewed as an 8.5 for 9.5 and force it to 10.5-11.

Hope this helps.