Cap Rate and Cash on Cash

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Any advice on targeted Cap Rate and Cash on Cash Return for Duplexes and Triplexes? I have a deal I'm reviewing now that has an 11% Cap Rate and a 15% Cash on Cash (calculated as cash generated after debt service divided by total equity + closing costs). Thanks in advance for your input!

Broken record here - compare your deal to similar deals that have SOLD in the area within ideally the past 6 months.  How does it compare on all levels?

What are you using for formulas? What does Equity have to do with Cash? Also, you wouldn't use both to analyze a deal. CAP rate is a commercial analysis, and CoCR is residential. Duplexes and Tri's are still residential. Commercial doesn't start until you have 4 units.

When I mentioned total equity I was referring to my down payment, so that plus closing cost is my total upfront cash required or total cash equity. I would argue that the concept of a Cap Rate is the same whether a residential or commercial property. It's simply a ratio of Purchase to NOI and another tool to analyze the deal metrics.

@Greg Tawes you would also want to put any initial capex required into the "upfront cash" component. Back to @Joe Villeneuve 's point, however, I would recommend taking a spin through the book "What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures" by Frank Gallinelli so that you're more comfortable analyzing and comparing the types of metrics that are relevant for the asset class you are pursuing. 

@Greg Tawes Well, those numbers would be great here in Encinitas, CA and lackluster in a dicey part of Akron, OH. So, ummmmmm...yeah...impossible to say 🤷🏻‍♂️

It’s a duplex and triplex, look at sold comps. You could be underpaying or overpaying and there’s no way to know with percentage metrics. Just to extrapolate this our further, you can’t take the $50K warzone duplex that rents out for $750 per side and then use a commercial cap-rate to decide that the property is worth something more.

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