Cap rate and Annualized ROI

[Nicholas A.]

What are people aiming for, accepting, and avoiding on small multifamily 4 units or less, single family homes in terms of cap rate and annualized ROI in the Milwaukee and Racine/Kenosha Wisconsin areas?

Numbers would be before the property is stabilized and when its stabilized.

[Greg Scott]

I would look to cash-on-cash returns and equity capture as your two primary metrics.  Nobody can gauge appreciation with any precision so just ignore that.

Cap Rate is effectively meaningless on a 4-unit property.  Comparative Market Analysis or comps are used to value quads.  Commercial properties, including 5+ unit multifamily are valued using the income approach.  Cap Rate is a critical component of the income approach to valuation of commercial properties.  Cap Rate has no use for single family, duplexes, triplexes or quads.