Lender · Tampa, FL · Member since 2015 · 63 posts · 44 votes
11y
Hi, Adriano!
I'm no expert, but 6.1% is low in general for REI. Remember that the stock market has an average ROR of about 7% long term, and while real estate returns are different than stock market returns, you might consider things in these terms.
Average CAP rates are between 7-10% from what I've heard, but everyone will tell you a little differently; I've been looking for properties with at least 8%, but I'm a beginner so I just need to get in the game anyway, so I wouldn't let one-notch-shy-of-pristine discourage me.
Maybe a better question is, did you get that CAP figure from the seller or their listing, or did you calculate it yourself? Sellers are almost always conservative in the costs they associate with owning a property, while being liberal in the income they associate with the property. The CAP rate might be different with your calculations.
Investor · Miami, FL · Member since 2015 · 21 posts · 8 votes
11y
I would agree with a lot of what @Devin Beverage said. I think that is low for class C, as class A in Miami is probably around 5 (lower for institutional). I would think you would want around an 8 or so for class C.
I think two questions are more important: 1) Is the NOI correct? Think about all costs that could associated with ownership and look at the CURRENT rent roll. Sellers a lot of time will try to tell you what the rent COULD be.
The other important question is if the return is worth it. 8% cap rate may be the current market rate for Miami, but that does not mean it is worth it for you. There may be a value add property with more upside, a nicer building in a different market, or a different asset class in general (like the stock market) that better suits your investment needs.
Investor · Visalia, CA · Member since 2015 · 16 posts · 4 votes
11y
Thanks to both @DevinBeverage and @EvanDemchik, I've had the CAP rate calculated with conservative numbers by an experienced realtor, who happens to also be my business partner. The rate is based on the current rent roll, which seem to be lower than market, so there is room for improvement right after the purchase. I've found Miami to be a seller's market and it is hard to find a seller wanting to sell at an 8% CAP based on current rent rolls. I've found most sellers sticking to $100k per door independently of the type of units involved.