What's a good CAP Rate (NOI) for SFR in San Jose, CA?

[Kyle Tolbert]

Hello,

I am new the this site and found it's very helpful advises from some of the experience and professional real estate investors.

Base on my research, the cap rate for San Jose rental is between 3.5-4% (NOI) for the past 2 years (2016-2017). Anyways there is deal came to me from a friend "broker". A single family home selling at $1.5 mil, east side San Jose, but nicer neighborhood, currently rental at $7,500 a month (4/3) & (3/3). The house was recently remodel and built, so not much of maintained need to be done. The currently cap rate for this property is at ~5%, which is a very good deal. But of course there's a catch to this good deal. Part of the extension was built with no permit "very nicely/professional done", that's reason why the owner was able to rent it as 2 separate units and collecting $7,500/month. I looked at the tax return and it stated at $7,500/month, and the tenants always pay on time base on the bank statement which I am very surprised the seller willing to show it to me. I have not seems or feel anything fishy about this deal. I did pull the permit at the city and of course everything described as accurate. There's no complaint about the property online reasearch.

Please let me know what do you guys think about this deal.

Thanks in advance.