Less than ideal cap rate

3 Replies

I have two questions. My first question relates to a single family unit that I bought last year to reside in but have just converted to a rental. After research and plugging in all the numbers I have found that this property,( priced for 152000, closed at 168000 with additional improvement from the builder - projected gross rent of between 1295-1400) has a less than ideal cap rate. I don't know if it would be more prudent to hold onto the property and take it as a lesson learned or to liquidate if I can make a small profit off the house.

My second question - how many of you have incorporated your real estate holdings into an LLC to redirect liability away from you, the owner? If so is it worth the additional costs involved?

@Zacharias Salva  - More important than the cap rate is what your personal goals are.  Do you cash flow on the property?  Can you sell it for a substantial gain and get better returns elsewhere?  The success of an investment is in the eye of the beholder and is really depending on your local market.  

For asset protection - read this thread from a few days ago

http://beta.biggerpockets.com/forums/79/topics/131...

Brie Schmidt, Real Estate Agent in Illinois (#471.018287) and Wisconsin (#57846-90)
Originally posted by @Brie Schmidt :

@Zacharias Salva  - More important than the cap rate is what your personal goals are.  Do you cash flow on the property?  Can you sell it for a substantial gain and get better returns elsewhere?  The success of an investment is in the eye of the beholder and is really depending on your local market.  

For asset protection - read this thread from a few days ago

http://beta.biggerpockets.com/forums/79/topics/131...

 just curious... what is an ideal cap rate for good cashflow income? 

Welcome to BP. 

Cap rates are strictly market driven. There is no 1 "good cap rate". Most investors are happy with a range of 8% - 12% cap rate. 

I have a series LLC therefore I could add properties anytime without forming a separate LLC. In my opinion, If you are shooting for LLC, go with series LLC.

Hope it helps.

James Syed, Real Estate Agent in IL (#471018522)
618-406-9775

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