 Cap Rates (by GKARL [PA]) Aug 19, 2017 3:37 PM
 Cap Rates (by elliot [RI]) Aug 19, 2017 3:40 PM
Cap Rates (by Andrew,Canada [ON]) Aug 19, 2017 6:29 PM
Cap Rates (by GKARL [PA]) Aug 19, 2017 7:08 PM
Cap Rates (by Smokowna [MD]) Aug 19, 2017 7:26 PM
Cap Rates (by GKARL [PA]) Aug 20, 2017 4:34 AM
Cap Rates (by LisaFL [FL]) Aug 20, 2017 5:13 AM
Cap Rates (by Pmh [TX]) Aug 20, 2017 6:36 AM
Cap Rates (by LisaFL [FL]) Aug 20, 2017 7:12 AM
Cap Rates (by Pmh [TX]) Aug 20, 2017 7:57 AM
Cap Rates (by GKARL [PA]) Aug 20, 2017 8:41 AM
Cap Rates (by Pmh [TX]) Aug 21, 2017 4:38 PM
Cap Rates (by Chris [CT]) Aug 21, 2017 4:54 PM
Cap Rates (by GKARL [PA]) Aug 21, 2017 10:11 PM
Cap Rates (by Robin [WI]) Aug 22, 2017 3:57 AM
Cap Rates (by GKARL [PA]) Posted on: Aug 19, 2017 3:37 PM
Message:
I was going through Loop Net today looking at MFH and saw one going for 295,000 with a 7.6% cap rate. Granted, it was in an area that's gentrifying, so there may be some upward price appreciation, but to me, that's already been priced in. If this property is leveraged, we're looking at net cash flow after paying the mortgage of only about $ 7000 a year. I could buy a SFH for the amount of the downpayment and net $ 7000 and not be in debt at all. For me, I need at least 10% to 12% for the place to be worth it as that would generate cash flow in an amount at least equal to one half of operating income. I just can't wrap my head around a cap rate that low. Am I missing something here? --207.172.xx.xxx |
Cap Rates (by elliot [RI]) Posted on: Aug 19, 2017 3:40 PM
Message:
I believe different markets have completely different cap rate. Also cap rate is generally used in larger deals.. I would focus on cash on cash return for small MFH.. --73.16.xxx.xxx |
Cap Rates (by Andrew,Canada [ON]) Posted on: Aug 19, 2017 6:29 PM
Message:
"I just can't wrap my head around a cap rate that low. Am I missing something here?"
In our market (toronto) CAP rates on a SFH or condo are actually often negative.
Even purpose built multi rental properties here, only have a CAP rate of 2 percent or so after all real expenses are included.
"investors" are buying for future appreciation.........at a time when our interest rates are rising.
Ironically these investors might still profit as rents just sky rocketed when the govt bought in rent control. Rents jumped in anticipation of the rent control and can still be raised to any level when the apt is vacant. The rent control also killed any rental building projects, reducing the supply of apts.
So..... can you get your head around a NEGATIVE CAP rate LOL.....it exists here.
In fact i just saw a triplex (legal duplex, so the 3rd apt isnt legal) listed for 2 million dollars with a monthly gross rent of about $2100 BEFORE expenses. And that is AFTER our market has dropped about 5 to 10 percent in price. --70.30.xx.xxx |
Cap Rates (by GKARL [PA]) Posted on: Aug 19, 2017 7:08 PM
Message:
Andrew--I guess the analogy would be a growth stock that pays little or no dividend that one simply buys in anticipation of capital appreciation. The difference is that unlike a growth stock, there are no underlying profits or even the hope that rents will produce a growing amount of income. The investment is based strictly on the greater fool theory or that someone is going to be a greater fool than you and pay more that what you paid. That's clearly not sustainable. I can fathom 7% let alone a negative cap. I could only justify that if rents were increasing or if there was something I could do the property to generate more income. --207.172.xx.xxx |
Cap Rates (by Smokowna [MD]) Posted on: Aug 19, 2017 7:26 PM
Message:
Andrew, Any thoughts on why there are so many for rent signs in Montreal?
A Louer --74.96.xxx.xxx |
Cap Rates (by GKARL [PA]) Posted on: Aug 20, 2017 4:34 AM
Message:
I meant I "can't" fathom a 7% cap let alone a negative one. --207.172.xx.xxx |
Cap Rates (by LisaFL [FL]) Posted on: Aug 20, 2017 5:13 AM
Message:
GKarl,
What is considered my CAP rate on these examples:
Cost of house including fixes made to get it rent ready $97,000. Annual NET income $12,000. Value of house now (selling price) not including cost to sell so net selling proceeds probably $180,000.
Do you determine the rate of return based on what it cost or what it's worth now?
What is the rate on a house purchased for $125,000 that nets $8500 annually?
--173.170.xxx.xxx |
Cap Rates (by Pmh [TX]) Posted on: Aug 20, 2017 6:36 AM
Message:
CAP rate derived from net income & purchase price. --166.137.xxx.xx |
Cap Rates (by LisaFL [FL]) Posted on: Aug 20, 2017 7:12 AM
Message:
So on my $97,000 house after purchase the CAP rate is roughly 12%.
But now the asset is worth $180,000 net. So on $180,000 which I'm keeping locked up and earning $12,000 annually on, doesn't this now make the CAP rate roughly 6%?
Then again I haven't accounted for rate of return due to appreciation.
Guess what I don't understand well is how appreciation factors in. Is that just considered a bonus? --173.170.xxx.xxx |
Cap Rates (by Pmh [TX]) Posted on: Aug 20, 2017 7:57 AM
Message:
if you sold it for 180k the cap rate for buyer is 6% --166.137.xxx.xx |
Cap Rates (by GKARL [PA]) Posted on: Aug 20, 2017 8:41 AM
Message:
Lisa, the cap rate is relative to your invested dollars rather than fmv measured as strictly by NOI over investment. Your total ROI would encompass your cumulative NOI plus the amount realized upon sale. Appreciation is a bonus and in your case, you made an excellent investment.
To me the best way to make money in real estate is to develop a property or enhance a property; in other words create the value while getting decent cash flow as well. Your example is what I look for. And if I can't enhance it, I'm fine with cash flow. One can certainly make money speculating, but to me that's very risky as it's based more on perception and psychology versus fundamentals revolving around cash flow. --207.172.xx.xxx |
Cap Rates (by Pmh [TX]) Posted on: Aug 21, 2017 4:38 PM
Message:
Lisa. You have nothing locked up except your buy price until you sell. --97.94.xxx.xx |
Cap Rates (by Chris [CT]) Posted on: Aug 21, 2017 4:54 PM
Message:
When the market is good Loopnet is full over overpriced deals.
A 7 cap is what you would get in say Fairfield county or around NY but those are A+ locations and a large number of those deals are cash purchases.
Think hedge fund guy, pension fund, or shady Chinese businessman looking to park $10m for a bit. --24.45.xxx.xx |
Cap Rates (by GKARL [PA]) Posted on: Aug 21, 2017 10:11 PM
Message:
The problem is that this particular area is not A+. It's in transition and they've priced A+ in already. It's way over priced. --208.54.xx.xxx |
Cap Rates (by Robin [WI]) Posted on: Aug 22, 2017 3:57 AM
Message:
Sounds like you know the answer, GKARL. It's overpriced. Keep looking. Or wait six months and submit a lowball offer. --204.210.xxx.xxx |
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