West Allis, WI · Member since 2016 · 8 posts · 5 votes
Hello All,
I'm in the process of looking for my first duplex in the West Allis / Greenfield area of Wisconsin. I've been analyizing several properties, but where I could use some help is determining what is a good cap rate for this area?
FYI, this will be a house hack, and below is an example of what I have been assuming for expenses, etc. when calculating the Cap Rate. I have broken it into 3 different situations:
1. 1 Unit Rented (House Hack) - Managing the unit, doing yard work, etc.
2. 2 Units Rented - Managing the Unit, not doing yard work, etc.
3. 2 Units Rented - Not Managing the Unit, not doing yard work, etc.
Milwaukee, WI · Member since 2014 · 180 posts · 114 votes
8y
I have a couple duplexes in the same area you are looking at and can share a few of my numbers for what it is worth.
1. Your insurance number is about double what you should be paying if not owner occupied. Look for an independent broker relationship if you don't have one already.
2. Purchase price - there are better deals out there. Seems like you might be overspending a bit for the area.
3. Capex vs repairs. I'm around 12-15% for both. Your numbers are a little conservative depending on the condition of the property
4. Water is a touch low. I'm averaging $100/mo for a duplex.
As far as returns, I aim for $150-$200/door. Done right, you should still be able to find this in your target area. Good luck!
West Allis, WI · Member since 2016 · 8 posts · 5 votes
8y
Sorry, the screenshots may not all be legible. My main curiosity is what others have seen/are seeing as far as cap rates in the area on small multi-families, particularly duplexes.
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
8y
@David Benson, (commercial) area "cap rate" is a completely irrelevant factor in establishing the value of duplexes, triplexes, or quadplexes. Instead, look at the value of sold comps! Cheers...
West Allis, WI · Member since 2016 · 8 posts · 5 votes
8y
Brent Coombs - The information that I am curious about is the typical expected returns on this type of property in this area. The nomenclature that I used may not be exact, but my goal is to be able to recognize a great deal vs. an average deal.
I have been analyzing quite a few comps, but not knowing if they’re as good or as profitable as some that others have seen.
Brent Coombs - The information that I am curious about is the typical expected returns on this type of property in this area. The nomenclature that I used may not be exact, but my goal is to be able to recognize a great deal vs. an average deal.
I have been analyzing quite a few comps, but not knowing if they’re as good or as profitable as some that others have seen.
Aah. You need specific advice from local Agents. Not really BP's job to help you that way. And even when you get advice from Agents, you still need to check and verify. Comparing apples over here, with apples over there, can be tricky at the best of times. Good luck...
Real Estate Agent · Saint Petersburg · Member since 2017 · 45 posts · 41 votes
8y
Perhaps you are referring to the GRM (Gross Rent Multiplier)?
Similar to the Cap Rate in commercial, the GRM relates the income to the value in residential properties.
You should have your own realistic expected ROI and crunch the numbers on every property until you find one that meets that criteria. No magic number can really tell you that.
Milwaukee, WI · Member since 2014 · 180 posts · 114 votes
8y
I have a couple duplexes in the same area you are looking at and can share a few of my numbers for what it is worth.
1. Your insurance number is about double what you should be paying if not owner occupied. Look for an independent broker relationship if you don't have one already.
2. Purchase price - there are better deals out there. Seems like you might be overspending a bit for the area.
3. Capex vs repairs. I'm around 12-15% for both. Your numbers are a little conservative depending on the condition of the property
4. Water is a touch low. I'm averaging $100/mo for a duplex.
As far as returns, I aim for $150-$200/door. Done right, you should still be able to find this in your target area. Good luck!
Real Estate Agent · Milwaukee, WI · Member since 2015 · 43 posts · 12 votes
8y
@David Benson I have been analyzing mostly Multi-Families(between 4-8) in the West Allis area. What I am finding on the current market is most are between 4.5-6.5% Cap Rate. There are some currently that are higher but need quite a bit of work done to them.
Let me know if there are any additional details I can provide. Great time to invest in our market!!!