Western Washington Cap Rate

[Andrew Ralston]

I am looking for a multifamily listing closer to a 10% cap rate. Am I being unreasonable in my hopes to find something in this range between Tacoma and Marysville?

[Curtis Bidwell]

@Andrew Ralston I’m reminded of the meme that said, “We did have one house in your price range.  Unfortunately we sold it in 1969”.  But seriously, don’t get hung up on cap rates! They are merely of an indication of what the market is willing to pay for a particular asset, in x condition, and x location at this moment in history… subject to change without notice! 

It is only one indicator among many (better ones) to consider.  It does not tell you if the property is a good deal - and very well may be a worse deal because of a high cap rate! High cap rates tend to indicate less desirable, more run down properties.  More risk, higher rate. 

I like to find properties that i can improve through upgrades, better management, and market rents. My last one was barely a 5 cap that basically broke even on day 1.  Within 60 days I was at 6.25% cash on cash, and after 1 year I was at almost 20% (I then refinanced my cash out of the investment at twice the purchase value!). If I had said No due to a low cap rate I would have missed out on a great opportunity.