cap rates question

General Landlording & Rental Properties
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cap rates question

Stephen Dominick
Investor · Brodheadsville, PA · Member since 2013 · 98 posts · 21 votes

Loopnet has been sending me lots of multi family properties with cap rates listed. Do they pre vett these properties to come to these cap rates. I know to do my own due diligence I was just wondering if any of it could be considered a starting point. Thanks.

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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
11y

Nope.  Cap rates are provided by the seller or their agents.  Rest assured your actual cap rate won't be any higher than the claimed number.

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    11y

    Nope.  Cap rates are provided by the seller or their agents.  Rest assured your actual cap rate won't be any higher than the claimed number.

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  • Elizabeth Colegrove
    Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
    11y

    Everything is provide by the seller so like everything else due diligence is required.

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  • Carrington Booth
    Involved In Real Estate · Los Angeles, CA · Member since 2015 · 18 posts · 8 votes
    11y

    I have seen agents with no clue about cap rates use the gross income instead of NOI when calculating a cap. *Cringe*

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  • Garth Gissel
    Property Manager · Weston, OR · Member since 2015 · 27 posts · 5 votes
    11y

    Is this a correctly figured Cap Rate?

    Gross annual rental reciepts- 28,200

    Annual Taxes insurance -         3,720

    Vacancy                                    2,800

    NOI - 21,680 / 284,000 (Value)= 7.6% CapRate

    Did I miss anything or offbase anywhere?

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  • Account Closed
    Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes
    11y

    It looks right to me. Are there any expenses other than tax/ins/vacancy? What about repairs? 

    In our market, we just do minor 5-10k rehab on houses, and then owner finance. Super simple and profitable. 12-14% cap is typical right now.

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  • Garth Gissel
    Property Manager · Weston, OR · Member since 2015 · 27 posts · 5 votes
    11y

    Thanks Joe. How does the actual cost of acquisition figure in? Same example as above, say you get into this for 56K now you are looking at 21,600/56000=38% return on investment? Isnt that a valid way to look at a a purchase?

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  • Elizabeth Colegrove
    Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
    11y

    @Garth Gissel 

    That is but it doesn't evaluate your other costs. With a multi-family there are alot more costs. Some you pay utitilies, common area cleaning etc. 

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