All Forum Posts by: Account Closed

And can you show Brad and me exactly how you determine cap rates? 

I doubt the gap in value from good to bad areas will be 50% for the same rents.  At least it has not been in my experience.  Now the rent may not be twice as much for a property worth double but because of the demand you will probably see less vacancy and less wear and tear and probably the more expensive property will actually be smaller so any expense based of sf will be less for the most expensive property.  As I stated earlier rent to price ratio is a meaningless metric.  More than likely the better property will be more profitable.

Direct sales comparison is the best way to value any property.  What are other similar 3plexes selling for.  Then you can always break it down by $ per sf, $ per unit, $ per bedroom, etc. 

If there are sales of sales of similar units and you know your market rents then it is easy to use a GRM that other properties have at.

Geez Melissa where are you getting these numbers?  You don't "get" an over 9% cap rate!  And on a single family home?  Laughable!  Sounds like you have no clue what you are talking about or you are trying to scam the OP.  

BP is full of scammers.  Buyers beware. 

http://www.pwc.com/us/en/asset-management/real-est...

 Where on earth would you get reliable cap rate comps?  Forget cap rates.  They are only used by someone trying to sell crap to novices.

Just like $ per sf in a market the market cap rate for similar properties will be a very small range.  But there is no reliable source of cap rates for small multi's so forget trying to figure cap rates.

Direct sales comparison is the best way to value these properties. If you want a check using the income approach use a GRM.

Your question and analysis is flawed.  "Returns"?  How the heck are you measuring them?  Do you want a PROFITABLE market.  SF, NYC, LA or Honolulu are the place you want to be.  For profit you want rising rents and appreciation.   

 Nah!  I'll sell it for $10.00  For cash flow look for rent growth.  For profitability look for appreciation.  Guess what?  Appreciation markets usually have higher rent growth.  Send yer $10,00 to your animal rescue.

So Tina, what did Hyde Park properties rent/sell for 10 years ago, 20, 30? 

I have to say there is no "proper" rent to purchase price ratio.  You should see the rent growth and appreciation to determine profitability.

Also dead equity is definitely something that needs to be accounted for but you also have to determine WHERE that equity is coming from.  If it is your down payment and the mortgage paydown  then it is bought equity and should be earning its keep as @Greg S. says.   But if it is appreciation equity then it is a part of profit and has already earned its keep.