Cap rate in Cincinnati?

9 Replies

What is the caprate everyone is buying in Cincinnati area? Most of the properties I am looking at are 8 or less. I am aiming at least 10, is it too ambitious?

Forgot to mention that these properties are class C !

I buy in C+ areas and I shoot for a 8% cap minimum with value add potential. Typically when I get done with a project they perform much higher due to my added income. 

7-8 is attainable. If I see 10 it’s almost a red flag. You can buy properties at 10+ but generally in this market those properties don’t meet my criteria. I stay C+ and higher.

Originally posted by @Priya Thomas :
What is the caprate everyone is buying in Cincinnati area? Most of the properties I am looking at are 8 or less. I am aiming at least 10, is it too ambitious?

 We're seeing a lot of our investors look to Cincinnati to diversify and for the returns.  We're looking at about 8-10caps.  Keep in mind that the cap rate will always be determined by the sales price so unless one is taking that into consideration while running numbers, it can be challenging to give an accurate cap rate for a given area or type of property.  

Originally posted by @Joseph Cornwell :

I buy in C+ areas and I shoot for a 8% cap minimum with value add potential. Typically when I get done with a project they perform much higher due to my added income. 

 Same exact thing I do as well Priya.  Best of luck to you.  

Important to note, there is a distinction between capitalization rate of properties listed for sale and properties that have closed. A cap rate obtained from the "listed" property may not accurately reflect the market. Even if it's "close enough", it's not a reliable metric. 

Thank you. What is the main source of your deals?

@Robert Ellis has a really good point. I recently took an out-of-town client out to look at 8- to 20-unit properties but instead of calculating the cap rate based on the asking price, we calculated the purchase price that would give my buyer an acceptable cap based on her own projections and interests. There's no reason not to send out $300,000 offers on properties listed at $375,000, just to see who's willing to negotiate.

Im currently looking at 2-4 units with cap rates 10-12 C+ class. It's tough right now to find that deal and something that is not overpriced. Does anyone feel that the cinci market is still pretty hot? 

Andrew

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