What is the cap rate in your city?

[Account Closed]

For those of you who have done a deal recently, I’m curious what the cap rate is in your city.

City?

Single Family or Multifamily?

Cap Rate?

Property Class?

Purchase Price?

I’ll go first:

Phoenix

Single Family

6% Cap

Class A

$375k

[Joe Splitrock]

@Account Closed generally speaking CAP rate is not a great measure for single family homes. Demand for single family homes is driven more by owner occupied, rather than investor return. CAP rate uses NOI, which is pretty easy to find for larger multifamily or office space. These properties are run like businesses, so they have operating statements. When you get into single family, people often fail to include many expenses when calculating NOI. For example; insurance, taxes, leasing, management, vacancy, CAPEX and even repairs in some cases. You find real estate agents saying Annual Rent is X and they divide by purchase price, then call it CAP rate. Or they just subtract insurance and taxes and consider that all expense. I have even seen agents say things like "they managed themselves so there is no management expense". That is like saying "the owner was a plumber so the plumbing repairs were free".

No problem calculating it for single family, just make sure the number is all-in and be aware many people calculate CAP rate wrong on single family homes. Qualify the data before using it. If CBRE is doing it, you can be sure they are looking at true NOI, but I doubt they would look at single family.

On your property example the net income per month is $1875. What is the actual rent you are charging per month?